The pound is coming under some pressure this morning, as City traders fret about the state of the Brexit talks.
Sterling has shed over half a cent against the US dollar, falling back below $1.40 to trade around $1.394.
The pound had been rallying in recent weeks, driven by speculation that the Bank of England will hike borrowing costs. But investors haven’t taken their eye off Brexit, and the risks of a ‘hard’ exit from the European Union.
Jasper Lawler of CMC Markets says the infighting within the government is hurting the pound.
Today’s losses come ahead of an eagerly-awaited speech from David Davis, secretary of state for leaving the EU. He’ll pledge the Britain won’t abandon workers rights and environmental concerns after Brexit.
In a colourful twist, Davis is expected to promise that Britain won’t turn into a Mad Max-style dysopia. That sort of talk might not calm nerves in the City…..
Tuesday’s GUARDIAN: “Davis: Brexit will not plunge Britain into ‘Mad Max dystopia’ “ #bbcpapers #tomorrowspaperstoday pic.twitter.com/NynCqk8JRP
David Davis will say in his speech tomorrow: “They fear that Brexit could lead to an Anglo-Saxon race to the bottom, with Britain plunged into a Mad Max-style world borrowed from dystopian fiction.” pic.twitter.com/N3JpiIysjR
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European stock markets are expected to open cautiously today, after a weak session in Asia.
The Japanese and South Korean markets have both shed around 1%, with some profit taking after Monday’s gains.
Although the volatility has calmed down, there’s still some anxiety out there, as David Madden of CMC Markets says:
The CBI will release a new healthcheck on Britain’s manufacturing sector today, which might move the markets. There’s also a fresh German economic confidence report. It may show that the recent stock market volatility, and the long coalition talks in Germany, have hit morale.
On the corporate front, HSBC, BHP Billiton and Intercontinental Hotels are reporting results.
10am GMT: The ZEW index of German economic confidence for February
11am GMT: CBI industrial trends survey for February
3pm GMT: The EC’s Eurozone consumer confidence survey for February