UK pound slides more than 1% as EU trade deal talks drag on

UK pound slides more than 1% as EU trade deal talks drag on

The pound dropped and the dollar rose in Asian trading in response to tighter coronavirus lockdown measures in Britain and a lack of progress on a UK-EU Brexit trade deal as well news of a long-awaited US economic relief deal.

The British currency fell 1.2 per cent to $1.3360 on Monday morning in Asia, as strained negotiations over a trade agreement with the EU dragged on with no resolution in sight. 

Sterling’s weakness came as the dollar strengthened after lawmakers in Washington finally reached agreement on a $900bn stimulus deal — the second largest relief bill in US history after the $2.2tn Cares Act in March. The dollar index climbed 0.3 per cent on Monday morning.

Analysts said the focus on talks in Europe would intensify in the wake of the US pandemic relief plan, which would include $600 stimulus cheques for individuals and aid for small businesses.

“While the US fiscal aid consideration had largely played out according to the market’s expectations, a Brexit deal will be one to watch in the short term with prices evidently not positioned for any upset scenario,” said Jingyi Pan, senior market strategist at IG Group.

On Saturday, Boris Johnson, UK prime minister, unveiled tough new restrictions designed to contain a virulent new strain of the coronavirus. At least 10 European countries banned travel from the UK on Sunday and France halted freight transport via the English Channel Tunnel.

Over the weekend, a deadlock on fishing rights in Britain’s waters continued to stall negotiations about a Brexit trade deal, with officials weighing whether a phone call between Mr Johnson and Ursula von der Leyen, president of the European Commission, might help clear the impasse.

Stock markets across Asia were lower on Monday as negative sentiment fed by the new UK virus strain and a resurgence of cases across much of Asia overshadowed the US stimulus deal. Hong Kong’s Hang Seng index fell 0.3 per cent while Japan’s Topix was down 0.6 per cent and South Korea’s Kospi index was off 0.4 per cent. 

In commodities markets, Brent crude, the international oil benchmark, shed 3.1 per cent to $50.62 a barrel on concerns over global demand. The price of oil has rallied in recent months as progress towards a vaccine brightened the outlook, after collapsing earlier this year following the initial coronavirus outbreak.

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