In further Brexit developments, reports this morning that UK PM Theresa May is resisting the EU’s timetable for Brexit talks and is now aiming for a later Brexit deal deadline to the end of November. Previously both sides had said they were aiming for a deal in October, in order to leave enough time for the UK and European parliaments to debate and ratify the final terms before the March 29th exit date. This ‘game of chicken’ is fraught with so much danger, and as we have been flagging over the past few weeks the odds of a no deal is increasing each day. As we heard on Monday, UK International Trade Secretary Liam Fox stated the likelihood is now at 60%. From a market perspective, no surprises then that the pound has slipped further again overnight breaking through a couple of key levels. EURGBP broke through previous resistance of .8965 and so now puts .9000 firmly in its sights, a level not seen since September of last year. Cable also shifted with the pound hitting lows of 1.2919 with wider support now at 1.2850/55 and 1.2775 (August 2017 low). Looking at the wider picture, the material risk that now exists of the UK crashing out of the EU with no deal could see sterling face another significant period of deprecation. Recent commentators are discussing potential ranges of around 10%. Something for companies to consider and more of which we will be discussing in detail in due course.
The unresolved trade disputes between the US and Eurozone appears to be evident already. A number of downbeat German data readings cannot be overlooked as the single currency region faces a number of strenuous trade negotiations between its old foes. On Monday German Factory Orders tumbled below markets expectation, with foreign orders from outside the Eurozone dropping 5.9 percent. While yesterday another downbeat set of economic data showed industrial production declining 0.9 percent, worse than the 0.5 percent expected. These June figures will certainly leave a dent on the Eurozone as a whole, but more pressing, it may well leave European Commission President Jean Claude Junker in a difficult negotiation position. Whilst the single currency held steady yesterday against the dollar after Monday’s fall, EURUSD is still looking a little soft this morning threading either side of the 1.1600 pivot waiting for a break.