After a poor day on Tuesday, the GBP was notably weak early on Wednesday, hitting a fresh 2018 low of USD1.3486 before jumping half a cent on the Chinese comments about buying US bonds. It should be noted, though, that even after reaching 1.3555, the pound couldn’t sustain these gains and spent the rest of the day falling back to the low 1.35’s to leave it the worst performing major currency on the day.
After the poorly-received Government reshuffle, those Ministers who kept their jobs were back at work. Two of them with the highest profiles – the Chancellor of the Exchequer and the Minister for Exiting the EU - were in Germany to make a direct appeal to business leaders to help secure the future of Britain’s financial services within a Brexit deal. They said they were seeking a bespoke deal with the EU described as “the most ambitious in the world that should cover the length and breadth of our economies including the service industries — and financial services”. Good luck with that one…
In a joint article for the German newspaper Frankfurter Allgemeine, Philip Hammond and David Davis argued that Britain and Germany should use “imagination and ingenuity” to craft a “bespoke solution” to maximise economic co-operation. The EU’s Brexit negotiator Michel Barnier warned the UK last month, however, that “There is no place for financial services. There is not a single trade agreement that is open to financial services. It doesn’t exist.” Yesterday he said that, “Britain’s financial services cannot benefit from a passport in the single market nor from a system of generalised equivalence of standards”. This issue is not just a debating point, it is key to whether the UK can make a success of its post-Brexit status. The Pound’s fortunes should now closely track the progress that either side makes in the negotiations around the inclusion of financial services in a new free trade agreement.
Thursday will bring the always-interesting Bank of England Credit Conditions Survey. Ahead of that, the pound opens in Asia this morning at USD1.3510, AUD1.7240 and NZD1.8790.