Tensions over the UK’s trade talks with the EU have hit sterling hard for the second consecutive day as traders bet that the Bank of England may have to cut interest rates to cushion the economic blow of a disorderly Brexit. The pound dropped almost 1 per cent against the dollar to hit a low of $1.3043, taking its losses so far this week to 1.74 per cent after the Financial Times reported that the UK could tear up elements of its EU withdrawal agreement, which led to the resignation of a top government lawyer the following day.
Ahead of the start of the latest formal round of trade talks later on Tuesday, Prime Minister Boris Johnson expressed support for leaving the EU’s single market and customs union without a trade agreement and suggested that unless a deal is agreed by October 15, the two sides should “move on”. The one-year transition period for the UK’s exit from EU trade structures expires on December 31.
The decline snaps a winning streak for sterling, which has pushed higher against the struggling dollar. By the start of this month, it had reached its strongest levels of the year above $1.34, comfortably wiping out the decline experienced in the depths of the corona virus crisis in March. But Brexit is now back as a clear drag on the currency.
TREND : BEARISH
Time : 09/09/2020
Pivot : 1.3024
Technical View : LONG ABOVE 1.3044
Target : 1.3064, 1.3114, 1.3239, 1.3319
Technical View : SHORT BELOW 1.3004
Target : 1.2984, 1.2874, 1.2809, 1.2674