Sterling consolidated gains yesterday as investors eyed talks between the UK and the EU on a deal to prevent the UK from crashing out at the end of next month.
The pound was broadly flat at $1.3056, breaking three consecutive weeks of losses. On a weekly basis, it was also the best performing currency among its major rivals. Against the euro, it ended at 86.84p. The EU’s Brexit negotiator Michel Barnier said he could not rule out the possibility that the UK’s EU withdrawal will be delayed.
The UK is due to leave the EU on March 29, but UK prime minister Theresa May is seeking further concessions on her Brexit deal in hope of winning the support of MPs before putting it to another vote in the Commons.
If she fails, May will have to decide whether to delay Brexit or endanger the world’s fifth largest economy by leaving without a deal. She has promised to give parliament a chance to decide what to do about Brexit on Wednesday unless she can bring back a deal.
Optimism about some sort of imminent breakthrough is reflected in the currency derivatives markets with one-month pound risk reversals, a gauge of calls to puts on the pound, rising to one-month highs.
However, some analysts say the upside is limited for the pound in the short term as a deeply divided parliament might present significant hurdles for any concessions that May can wrangle out of the EU.
“The EU might make some concessions if it would help May to pass the bill through parliament, but unless May tells them what will pass, there’s no reason for them to budge,” said Marshall Gittler, chief strategist at ACLS Global.
British retailers say they plan the least investment in seven years ahead of Brexit, and job cuts in the sector have gathered pace.
Although retailers were the most upbeat about the general business situation in over two years, Brexit and longer-term structural changes were casting a shadow, according to the quarterly survey from the Confederation of British Industry.
Numerous surveys have shown businesses are holding off on investment while the UK remains at risk of leaving the EU deal without a deal. Official data for the three months to December published earlier this month showed the biggest fall in overall UK business investment since 2010.
“Until politicians can agree a deal that commands a majority in parliament, is acceptable to the EU and protects our economy, business despair will deepen. A deal must be negotiated, and no-deal averted,” CBI economist Anna Leach said. Retailers face the additional challenge of fierce online competition,
Reuters