A rally in the pound that had seen it hit three month highs against the euro collided with the hard reality of detailed Brexit talks on Monday and it lost ground against both the euro and the dollar.
After the positive mood music from the Wirral meeting between Taoiseach Leo Varadkar and British Prime Minister Boris Johnson on the potential for a deal to govern the UK’s exit from the European Union, detailed talks over the weekend saw some of that optimism unravel.
By Monday, the European Commission was was warning after the talks at the weekend that “a lot of work remains to be done” to get a deal done in time for October 31.
“The pound has reversed some of its gains from last week as reality sets in,” said Petr Krpata, a foreign exchange strategist at ING.
The pound was trading at 87.86p to the euro on Monday, down from 87.23p on Friday when it hit its strongest level against the euro since Boris Johnson became Prime Minister.as hopes of a Brexit deal surged on Friday.
“With the market possibly getting ahead of itself, the pound is now vulnerable to a sell-off should the talks break down again,” Mr Krpata said, adding that he expected the pound to head for 88p to the euro.
In the Queen’s Speech setting out the legislative agenda for Johnson’s government, the prime minister’s commitment to leaving the EU at the end of the month was repeated.
“My government’s priority has always been to secure the UK’s departure from the European Union on the 31st of October,” the Queen told parliament.
Johnson himself told parliament that Brexit was part of a plan for “nothing less than making our country the greatest place on earth”.
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