Thu, December 08, 2022

Pound Recovers Some Losses as Johnson Sets for Brexit Meet

Pound banknotes

The pound recouped some of its losses on Monday as UK Prime Minister Boris Johnson heads to Brussels. Johnson sets to travel in a last-ditch effort to broker a post-Brexit deal.

GBP/USD slipped 0.28% to $1.3399, but the pair had been down more than 1% intraday.

Boris Johnson and European Commission President Ursula von der Leyen will resolve the remaining differences on a post-Brexit trade deal. This will be in the coming days, as the two announced in a joint statement.

The statement said they agreed that the conditions for finalizing an agreement are not there. That’s due to the remaining significant differences in the level playing field, governance, and fisheries. These three are critical issues. 

Moreover, the statement said they asked their Chief Negotiators and their teams to prepare an overview of the remaining differences. Those are to be discussed in a physical meeting in Brussels in the coming days.

Johnson has reportedly offered to drop the UK’s controversial internal markets bill in exchange for a deal. That was in an apparent olive branch to the EU. 

As it seeks to undermine parts of the Brexit Withdrawal Agreement, the legislation has drawn strong criticism from the EU. 

EU chief negotiator Michel Barnier reportedly told EU leaders that a deal continues to hang in the balance. He set a new deadline of Wednesday to conclude talks. This has caused an early-day slump in the pound.

Both sides have raised the mixed messages on post-Brexit deal progress. Investors are doubting whether any progress has been made.

Currencies Movements

The dollar edged a little higher on Tuesday morning in Asia’s forex, keeping the momentum from overnight. 

The U.S. Dollar Index rose 0.09% to 90.868 by 11:22 PM ET (3:22 AM GMT). 

The USD/JPY pair added 0.02% to 104.04 in Asia. On Tuesday, Japan Prime Minister Yoshihide Suga said his administration would compile a new COVID-19 economic stimulus package. It will be worth JPY73.6 trillion ($708 billion), with fiscal measures at JPY 40 trillion ($385 billion).

The USD/CNY pair also climbed 0.11% to 6.5368. Chinese foreign trade saw a strong recovery, as Monday’s data suggested exports increased over 21% from the same month in 2019. 

Market watchers also paid close attention to renewed U.S.-China tensions. This came after the U.S. set sanctions on 14 Chinese officials for the crackdown on Hong Kong.

The AUD/USD pair gained 0.08% to 0.7426, while the NZD/USD pair lost 0.16% to 0.7031.


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