Irish Brexit border fears send GBP sliding

The issue of what could happen to the Irish border after Brexit dragged Sterling lower on Friday.

The pound is fluctuating this morning. GBP/EUR has climbed 0.2% to €1.1342, but GBP/USD has fallen to US$1.3445. GBP/AUD has climbed 0.1% to A$1.7701, GBP/NZD is up half a per cent to NZ$1.962, and GBP/CAD has risen 0.2% to C$1.7090.

Read on to see why the Irish border was weighing on the pound…

What’s been happening?

Markets were fretting on Friday about what will happen to the Irish border after Brexit, leaving the pound to fall from its best levels.

Now that it appears the issue of the divorce bill may be on track to being resolved soon, attention has turned to one of the other issues preventing negotiations on trade in December - the issue of a physical barrier along the Irish border.

If the UK leaves the customs union and single market then the divide between Northern Ireland and Ireland will be the only point of physical contact between British and EU territory.

In order to conduct customs checks, a hard border may be necessary, but the idea of physically splitting the country in two does not sit well with everyone involved.

The Irish government has even threatened to use its veto at the next European Council summit to block any attempt to progress talks on to the issue of trade until the UK has laid out a suitably comprehensive plan for dealing with the border problem.

The pound was given some respite against the euro, thanks to a damning report published (but not necessarily indicative of the viewpoint of) the European Central Bank (ECB).

The research claimed that the economies of the Eurozone were no better off since having joined the single currency, and that EUR had not helped shrink the inequality between their performance and prosperity in the way that it was claimed it would.

GBP/USD weakened throughout the day, with the US dollar pushed higher by the euro’s weakness.

However, Sterling was able to reclaim some ground later in the afternoon after the US ISM manufacturing index fell further than expected from 58.7 to 58.2.

What's coming up?

The UK construction PMI will be released shortly. This may not give the pound much support: not only because the forecast is for just a 0.2% increase to 51, but also because the construction sector accounts for only a small portion of the UK economy.

Brexit concerns could continue to take the headlines today.

However, GBP/EUR could make some gains if today’s Sentix investor confidence index shows the anticipated weakening in sentiment.

Factory orders data for October is the most notable release on a quiet US data calendar, which may afford Sterling some breathing room and limit the potential for severe losses.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.