Brexit or the United Kingdom’s departure from the European Union is, with each passing day, fast becoming a bigger headache for politicians both in London and Brussels as the March 29, 2019 deadline for the transition period gets ever closer.
The uncertainty surrounding British Prime Minister Theresa May’s Brexit strategy combined with even more pessimistic comments from EU leaders continues to shake the Sterling in foreign exchange markets.
On Wednesday morning of European time, GBP looked weaker than the start of the week as it felt the pressure from the possibility of a no-deal Brexit. EURGBP was trading just below 0.8780 for hours. GBPUSD though fell from the earlier day’s high of 1.3236 down to 1.3260 at some point.
European Council President Donald Tusk on Monday voiced the worst in the clearest and sternest tone a party to Brexit has used since the fateful June 23rd, 2016 referendum:
“Responsible as we are, we must prepare the EU for a no-deal scenario, which is more likely than ever before,” Tusk wrote in a letter addressed to the leaders of EU’s remaining 27 countries.
May is traveling to Brussels to address her EU counterparts in an attempt to convince them of her plans. Though the sticking point of the border separating Ireland from Northern Ireland remains firm on the table.
The impasse is caused by the fact that the Irish and EU want the continuation of a borderless Ireland, whereas the loyalist Northern Irish Party DUP that happens to be May government’s junior partner threatens to withdraw support from May should she agree to Brussels’ demands.
Labour Party’s relentless pro-EU opposition led by Jeremy Corbyn and right-wing threats from inside the Conservatives also make May’s job a lot more difficult as she heads to sit down with Tusk.
EU leaders were going to make a draft declaration on a future trade deal with the UK public, but they have now taken a step back. In November, an extraordinary meeting of the EU leaders will take place to see their options and be prepared for a no-deal Brexit.
May’s office told media that she was to come up with “concrete proposals” to break the deadlock, whereas Tusk said there was “no grounds for optimism.”
Meanwhile foreign finance companies based in London continue take measures to deal with the Brexit drama and protect themselves and their clients.
US Worries
The US bank, Wells Fargo said it was moving parts of its European investment from London to Paris with the aim of better serving its continental customers, without giving further details.
American officials have also warned that a hard Brexit could lead to damage in global financial stability.
“As the timeline for action gets shorter, the need to address potential financial and economic disruption increases. We want to ensure that potential spillovers particularly in the event of a hard Brexit are mitigated so that financial stability is maintained,” US Treasury undersecretary for international affairs David Malpass said at a meeting Tuesday of the Financial Stability Oversight Council.
Federal Reserve Chair Jerome Powell sounded worried that a “disorderly” British divorce from the EU could negatively affect the US economy.
“A slowdown in the EU economy following Brexit could indirectly affect the banks,” he said.
