The pound has lost more than 0.5% to the euro since the opening of yesterday’s trading session. Sterling’s weakness occurs as a reaction to declarations by David Frost, a leading British diplomat, that the UK will not align itself with the EU in environmental issues and labour rights. Investors reacted with dismay, to the words of the UK’s chief EU negotiator, as his stance raises the chances of there not being a trade deal in place between the EU and Great Britain at the end of the current transition period, because the EU made it clear in the past that adhesion to the so-called level playing field is paramount to the future relationship between the two blocks. This could just be a case of both sides flexing their muscles ahead of the negotiations but, with only 10 months left in the transition period, it is easy to understand why investors are shorting sterling, as the chances of Britain crashing out without a deal have just increased.
Ricardo Evangelista – Senior Analyst, ActivTrades
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