Stay 
Trading Conditions
Products
Tools
Political fears have continued to unsettle the British currency with no respite from hard-line Brexit talk. The UK government has continued to insist that the EU needs to re-open negotiations and remove the Northern Ireland backstop from the Withdrawal Agreement in order to avoid a 'no-deal' Brexit on October 31.
The government has also stated that the October 31 deadline must be met come what may. In the meeting with diplomats from the EU countries, the EU negotiators stated that there was no basis for a meaningful discussion, and talks were back to where they were three years ago.
The government has rejected claims that it was unwilling to negotiate and insisted that it did not want a 'no-deal' Brexit.
Sterling sentiment will inevitably remain very fragile in the short term, although the stronger-than-expected services PMI data provided a glimmer of hope. EUR/GBP has also corrected to just below 0.9200 from its 23-month highs at 0.9250
Most attention has focussed on risks to the UK from any 'hard' Brexit. The eurozone's economy will, however, also be damaged by any 'no-deal' outcome with particular damage to the Republic of Ireland. There would also inevitably be damage to the Dutch and Belgian economies.
Therefore, the euro will also be vulnerable if no fresh agreement is reached.
Fears over global currency wars will also be an important element following President Trump's escalation of the US-China dispute by naming China a currency manipulator.
Trump will continue to push for a weaker dollar, while the ECB is very likely to cut interest rates during its meeting in September. The Bank of Japan has also pledged to ease the monetary policy further if the inflation outlook deteriorates.
The UK economy will certainly be vulnerable in the event of further deterioration in the global trade outlook.
UK inflation is close to the target, however, the weak pound will put further upward pressure on inflation. Sterling is very cheap in a long-term perspective and, in this context, the Bank of England will not be pushing for a weaker currency.
InstaForex analytical reviews will make you fully aware of market trends! Being an InstaForex client, you are provided with a large number of free services for efficient trading.
