Recently, the sterling suffered a sharp loss in the wake of the fact
that the UK-EU trade talks are teetering on the brink of collapse. It
comes because the UK is preparing to legislate to deal freely with
Northern Ireland's freight under the expectation that a trade deal with
the EU is beyond reach. Once it succeeds, products from Northern Ireland
will have unfettered access to the UK's market without any customs
declarations as the UK has the power to decide which goods are subject
to EU tariffs, but the EU's subsidies involving Northern Irish firms may
not be active.To get more news about
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However, the above term is a breach of last year's Brexit deal, in
which it was agreed that Northern Ireland would remain aligned to EU
customs rules to avoid a hard border on Ireland. This was an important
concession of the UK at that time, and the largest difference between
the two parties was thus resolved. But now, the EU is likely to take
legal actions over the UK's breakdown of the deal since an angry
backlash has been provoked by Johnson, the British Prime Minister, who
simply overrode the achieved deal after anticipating a failed
negotiation.
Over the past few months, the sterling has been gaining although
there was no progress made in trade negotiations. The stalemate over the
talks surprisingly sparked a rise in the sterling both because of the
weak greenback and the expectation of financial markets on further
negotiation. This time, however, the U.S. dollar has reclaimed its
strength and the talks shall most probably break down. Currently,
financial markets are worried about not only the Brexit with no trade
deal, but last year's Brexit deal would all be overridden. That is, not
just a trade deal is beyond reach, but a clean break from Europe is even
possible, which will lead to a sustained sell-off of the sterling.
Although there is a chance for US stocks to bounce back and again hamper
the DXY, traders seem extremely worried that the UK would eventually
adopt such hard Brexit. Thus at this stage, the sterling is not only out
of momentum in the rebound, but may even struggle in panic selling.
Unless a UK-EU agreement is achieved dramatically, the sterling is
almost certain to be thrust into a vulnerable position.
