Market Overview

Pound Slips As No-Deal Brexit Scenario Emerges Again

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Pound Slips As No-Deal Brexit Scenario Emerges Again

The pound sterling slipped by 0.30% to 1.3289 against the U.S. dollar on Tuesday as no-deal Brexit scenarios reemerged after Boris Johnson's reelection as the country's prime minister.

What Happened

Johnson is reportedly working on amending the withdrawal agreement bill concerning Brexit in a way that will bar the parliament from further extending the Brexit deadline, The Guardian reported late Monday.

The amended bill will ensure that Brexit happens by the January 31 deadline, while the transition period must end by the December 31 deadline next year, The Guardian said.

This means that either the British government manages to strike a trade deal with the E.U. by the end of next year or be governed by the World Trade Organization's rules, which could be against the economic interests of both the E.U. and the U.K., according to The Guardian.

Johnson is calling for a free trade agreement, such as the existing one between Canada and the E.U., but as the Guardian noted, the two bodies took seven years to negotiate that agreement.

E.U. officials have casted doubt on the possibility of negotiating a trade agreement by the December 2020 deadline, which could effectively mean Britain leaving the bloc without even basic agreements over border control, customs, trade, and aviation in place, The Guardian said.

Market Performance

The pound sterling surged up to 1.3516 last week, the highest in over 18 months, as Johnson's win with a majority in the U.K. general election eased uncertainty over Brexit. The currency has lost up to 1.68% of its value since then, at press time.

Meanwhile, London Stock Exchange's FTSE 100 (INDEXFTSE: UKX) closed 2.25% higher at 7,519.05 on Monday.

 

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