Sterling dropped to a 6-week minimum




Sterling hit a 6-week low against the dollar and euro on Wednesday after plans to renegotiate the Brexit deal were unveiled.





The pound traded at $1.2947, losing 0.3% on the day and over 3% since the beginning of September.

The new bill will imply amendments to the Agreement on the exit from the bloc, signed in January.

This could affect negotiations, which began this week, and the likelihood of Britain leaving the EU without an agreement will increase.

Jordan Rochester expects a 40% chance of exiting the bloc without an agreement, which will grow to 50% over time.

“The end of government support to pay most of the wages of workers sent on forced leave due to the pandemic will occur in October, and unemployment will rise from 4% to 7.5-12%,” Rochester said.

Stephen Gallo, strategist at BMO Capital Markets notes that for EUR / GBP the 0.91 level will serve as a short-term resistance and attract bilateral capital flows, while the tense negotiations will stretch into October.

“Foreign exchange investors will bet against the weakening of the pound from this level, in anticipation that an agreement will be concluded,” he concludes.





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TAGS: BREXIT, BRITAIN, ECONOMY

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