GBP/USD is retreating from the highs in response to fraught Brexit talks. Concerns about tax hikes are also pounding the pound. Furthermore, the cable is seeing profit-taking, Yohay Elam, an analyst at FXStreet, informs.
Key quotes
“Brexit has returned from the beach and the backburner to center stage and sterling is suffering. French Foreign Minister Jean-Yves Le Drian said that Brexit talks are stuck due to the UK’s ‘intransigent and unrealistic attitude.’ His words came after David Frost, the UK’s chief negotiator, said that he is ready to walk away from the negotiating table.”
“Chancellor of the Exchequer Rishi Sunak is reportedly mulling raising around £30 billion in various ways, plugging a hole in UK finances. Apart from investors’ dismay at the idea, fellow Conservative MPs have expressed anger at these prospects. Growing criticism – mostly about handling coronavirus but also about reopening schools and taxes – is making Johnson’s job harder.”
“Another for the downfall is profit-taking. GBP/USD took full advantage of dollar weakness on Friday, soaring to the highest since December 2019 and exceeding the gains of peers such as the euro. The greenback declined following the Fed’s dovish policy change – prioritizing full employment at the expense of allowing inflation to overheat. That means keeping interest rates lower for longer, dollar negative. After Fed Chairman Powell announced the change last week, Vice Chair Richard Clarida will speak later on Monday.”
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