After Monday’s table-topping performance, Tuesday was a much poorer day for the GBP which fell against four of the five other currencies we follow closely here. The biggest fall (-0.7%) came against the NZD but losses elsewhere came against the EUR, CAD, AUD and NZD. The low point for GBP/USD was early in the London morning at 1.3820 and the pair rallied exactly one cent when the USD came under pressure after the North Korean news. By the end of the day, however, the GBP had fallen more than a quarter of a cent from its high, leaving it back on a 1.38 big figure.
On Brexit, we said yesterday that, “the reaction of the EU will be more important than the routine criticisms from Opposition parties in Westminster.” The Guardian newspaper carried the story that Stefaan de Rynck, the main adviser to the EU’s chief Brexit negotiator, Michel Barnier, stressed that the rules of the single market required far more than her chief proposal – a mutual recognition of standards. In his speech, at a special LSE lecture in London last night, de Rynck said, “The EU has moved away in the wake of the financial crisis from mutual recognition of national standards to a centralised approach with a single EU rule book and common enforcement structures and single supervisory structures.” He also claimed EU businesses, faced by a choice, “are more concerned with maintaining the integrity of the EU single market than any loss of access to British markets.”
It had been expected that the EU’s guidelines for the EU-UK post-Brexit trade talks would be released on Tuesday, but publication of that document, which will constitute the EU’s fullest response yet to Theresa May’s Lancaster House speech on Friday, has been postponed. This might remove one of the near-term negatives for the GBP, though Arlene Foster (the head of the DUP Coalition partner) has tweeted, “Just concluded a constructive meeting with Michel Barnier. There are sensible solutions to the border question. Greater flexibility needs to be shown by Brussels. Unacceptable for Northern Ireland to be treated separately from rest of UK as set out in the draft EU legal text.” The pound opens in Asia this morning at USD1.3880, GBP/AUD1.7750 and GBP/NZD1.9025.