Pound euro exchange rate update: EU threats provide 'great' opportunity to sell pound
THE POUND has dropped against the Euro and Dollar as news broke this morning that companies have been warned that the UK is set to become “a third country", providing a "great" opportunity to sell the pound.
The pound fell 0.21 percent against the euro to 1.1316 at 9:07am in London as news emerged that EU regulators sent out “be prepared” threats to a number of key UK industries before Christmas.
The Financial Times reviewed the memos and reported that the documents call on companies to be ready for the UK to become “a third country” on March 29 2019, with no automatic right to operate in the single market.
Kit Juckes, chief FX strategist at Societe Generale warned there were some risks to the UK if they “make a complete hash” of Brexit talks and the UK could end up at the “bottom of the growth table”.
Speaking to Bloomberg, he said: “We’re still going to see arrangements, within the EU for financial services, be more focused within the EU when the UK leaves if Brexit’s happening, Brexit’s going to happen.
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There are some risks if you make a complete hash of it, not just for the UK but for everybody else
“Yes, there are some risks if you make a complete hash of it, not just for the UK but for everybody else.
“But here we are, UK economy limping along, if the rest of the world’s bond yields go up and everyone else is tightening monetary policy because the global economy’s strong, that will just cement the UK’s position at the bottom of the growth table.”
Jukes added that the UK economy is not as bad as people feared but it is “limping” along and this has brought the pound bears back.
He said: “This is an economy that’s not as bad as the worst fears of people but it’s limping along.
“Here’s a currency which had a nice bounce because it was really sold, it got really really really really cheap and it’s come back up a little bit.
“But now that it’s come back up a little bit and the economy’s still not doing well and everybody else is doing better.
“One by one the sterling bears are coming back out of the woodwork to send you research notes this morning.”
The strategist added this is a “great” opportunity to sell the pound against the dollar.
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He said: “I think part of it, with this collapse in volatility, is that you’ve got an enormous number of bets coming off so I don’t think there are any bearish sterling positions left in the market.
“I think this is a great opportunity to sell the pound against the dollar, I think that’s the right way to put it.
“Right now, if you thought euro-dollar might go down because of the moving US bonds, I would sell the pound more than the euro all day long on that trade.”
The pound was down 0.12 percent against the dollar to 1.3535 at 9:08am in London.
