The pound is having a bit of a miserable time at present, with the prospect of a no-deal Brexit weighing heavily on her. Theresa May is struggling to get her own cabinet to agree to her proposals, which highlights how difficult it will be to get parliament to agree. Let us remember that the DUP is propping up May’s government at the moment and without their support, she is faced with what looks to be an impossible task.
Of course, the markets know this but they do seem to be a bit of an optimistic bunch. All it takes is a whiff of positivity over Brexit and the pound strengthens, but there is a distinct lack of detail at the moment; it’s all well and good May saying that 95% of the deal is done and only 5% remains, but when that 5% includes the Irish border issue, you realise that it may as well be 100%. It’s a real sticking point and it is completely reasonable to expect that the UK will exit the EU without a deal. What looked unimaginable just a few weeks ago now looks increasingly likely.
There were no economic data releases from the UK yesterday, but Brexit worries sent sterling tumbling towards the $1.28 mark – a level not seen since 5 September. So, where next? If a deal is agreed, we could see some big sterling strength but, for the reasons mentioned above, this looks unlikely at present. There is nothing on the schedule today, but Brexit could continue to have her wicked way with the pound.
