FX round-up: Pound slips as Brexit negotiations resume

Michele Maatouk WebFG News | 17 Jul, 2017 14:52 - Updated: 14:55 | | |

david davis brexit minister

The pound slipped against the dollar and the euro on Monday as Brexit secretary David Davis began a second round of negotiations in Brussels against a backdrop of political infighting among British ministers over the terms of the EU exit.

At 1445 BST, sterling was down 0.2% against the euro and the dollar at 1.1402 and 1.3073, respectively.

Joshua Mahony, market analyst at IG, said: "UK-EU Brexit discussions continue apace today, with the relationship seemingly souring amid critical comments from Boris Johnson and a drive from France towards a hard Brexit. There is now a clear need to get a transitional deal into place, with the negotiations looking ever more unlikely to conclude satisfactorily within the two-year deadline."

Despite being in the red, the pound was still trading very close to its recent highs.

Meanwhile, the euro was fetching 1.1463 dollars, down 0.1% and just shy of the 1.15 mark.

Ipek Ozkardeskaya, senior market analyst at London Capital Group, said resistance is seen at this level. "The eurozone's low inflation is already factored in the European Central Bank expectations and should not cause any significant market reaction before the policy meeting."

The ECB is due to make its latest policy announcement on Thursday, with market participants widely expecting no change to interest rates.

Ozkardeskaya said: "The accompanying statement will be the main highlight of this week. Investors are craving for insightful details about the ECB’s plans to unwind its quantitative easing programme."

She added that if ECB chief Mario Draghi's committee meets hawkish expectations at this week’s meeting, there could be a positive breakout in EURUSD above the 1.15 hurdle.

"An unexpected and undesired ECB silence could squeeze the euro markets lower. At the moment, traders remain buyer at dips. Short-term support is eyed at 1.1414 (minor 23.6% retrace on June - July rise) and 1.1368 (major 38.2% retrace)."

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