3 Minutes to Read tmsnrt.rs/2egbfVh* Graphic: Trade-weighted sterling since the Brexit vote tmsnrt.rs/2hwV9Hv (Edits prices and adds a comment) (Reuters) – LONDON, June 30 (Reuters) – The British pound rose on Wednesday as investors hoped that Britain and the European Union would agree to extend a customs exemption for chilled meat imports to Northern Ireland, which has strained relations between the two countries. Britain aims to strike an agreement on extending the exemption soon, according to Prime Minister Boris Johnson. Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets, stated, “I think everyone is assuming that extension will be granted.” According to currency specialists, the post-Brexit “sausage row” between Britain and the EU has had little influence on the pound so far. The pound was up 0.2 percent on the day at $1.3866 at 1107 GMT, after reaching a high of $1.3873 at 1033 GMT. In the grand scheme of things, it was still on course to have its worst month since September. It was up 0.3 percent against the euro, trading at 85.725 pence per euro. Low volatility means there are unlikely to be large moves in sterling, according to ING FX strategists, but “the market will take notice of any progress on trade tensions with the EU.” “A three-month extension of the waiver on chilled meat shipments from the United Kingdom to Northern Ireland would be welcome here.” Separately, a legal challenge to the post-Brexit Northern Ireland Protocol was denied by Northern Ireland’s high court, removing another possible political burden for sterling, according to CIBC’s Stretch. With one-month maturities, euro-sterling implied volatility measures were close to their lowest since mid-2019. The dollar has risen sharply after the US Federal Reserve’s surprise hawkish move on June 16, hitting the pound. At the start of the month, cable hit a two-year high of $1.425, but it has stayed generally in the $1.38-$1.40 region since the Fed meeting. Investors are particularly concerned about the spread of the Delta strain of COVID-19 in the United Kingdom, which led the government to postpone a complete reopening of the economy earlier this month. The government now expects pubs, restaurants, nightclubs, and other hospitality venues to reopen in full on July 19. Due to a vigorous struggle between supermarkets, prices charged by British retailers fell somewhat quicker in June than in May, but an industry group warned that rising costs tied to COVID-19 and Brexit might soon add to the rise in broader inflation. (Elizabeth Howcroft contributed reporting, and Kevin Liffey edited the piece.) Continue reading
