Sterling exchange rates have seen an immensely volatile couple of days and this volatility looks set to continue for the rest of the week.
UK Prime Minister Theresa May inched closer to securing a deal in the Brexit negotiations yesterday only for it to be scuppered at the last minute by the Democratic Unionist Party (DUP) late yesterday. The Pound saw material gains across the board yesterday before dipping after it was announced that no agreement had been reached and that negotiations would have to continue.
The DUP have made clear that they want to see Northern Ireland leave the EU on exactly the same terms as Britain and will not accept anything that distances Northern Ireland away for the United Kingdom. The Pound is continuing to fall today as the negotiations continue ahead of the key EU summit next week on the 14th and 15th of December and there is likely to be considerable volatility as new details emerge in this complex negotiation.
Whilst the expectation is that a deal will be hammered out before next week’s summit, the fall in Sterling’s value only highlights that nothing is guaranteed and that the markets are still keeping an open mind that there could be a situation where there is a no deal. The markets are cautiously optimistic that a deal will be agreed and this could present some excellent gains for Sterling exchange rates with a considerable jump higher against all of the major currencies.
Data for the UK overshadowed by Brexit talks
Data for the UK sees Purchasing Managers Index numbers for the services sector this morning although Brexit developments are likely to dominate the headlines in these coming days. UK GDP numbers are released on Friday which could make for an interesting end to the week. Any weakness here is likely to see the Pound slide lower although the numbers have help up reasonably well to date considering the additional uncertainty with Brexit.