News & Analysis

British Pound a star against Western majors as Brexit wranglings continue

Andrew Saks, Thursday, 22 April 2021

One thing is a certain outcome during all manner of long, drawn out global geopolitical affairs, and that is market volatility.

It would be more than completely understandable for the eyes of almost every member of the public across the entire globe to glaze over upon hearing or reading any more anodyne news about Britain's leaders engaged in seemingly endless conversations with Europe's political classes about who is going to drink which brand of tea and who is going to pay a few more pennies (or cents!) for a tomato.

These detail-specific wranglings have now gone on for four long years, and most observers will note that there has been very little change in the subjects being discussed, which looks like a stalemate over something very simple.

It is like paying huge legal fees to evict a non-paying tenant, and then allowing him to stay in your property rent free for years until he puts his toothbrush the right way up in its holder.

Despite the constant nature of the Brexit talks-related news, the surprising lack of consistency is in the currency movements between Britain's Pound and its western peers, the Euro and US Dollar.

Today, the Pound has soared, assuming a lofty position over the US Dollar with GBPUSD pair standing at 1.39.

This is the latest increase for the pound in a series of strengthening moves this week, all caused by different news items, all of which can be seen by viewing our News & Analysis section.

Today's increase in the Pound's value is being widely attributed to, once again, rising hopes of a post-Brexit deal between with the European Union on Northern Ireland.

Such hopes of a deal have been propagated for a number of years now, and it is quite surprising that any such news has any effect on the markets because the investing public, along with global companies who would have to settle their FX transactions in a cross border market or have to abide by different regulations once the UK and the European Union are separate entities, have heard this over and over again.

Also, United States, Australia, Singapore, Hong Kong, South Africa, Canada, Switzerland and Jamaica are all independent nations from the United Kingdom, yet have highly comprehensive trade deals with Britain and import and export a large amount of goods in both directions without issue.

Northern Ireland's trade position in a Post-Brexit world has been a very large elephant in the room for all concerned,

“Whitehall is throwing the kitchen sink at this thing,” said Stephen Kelly, chief executive of Manufacturing Northern Ireland this morning. “I cannot remember ever seeing this level of engagement from right across the UK government. Officials are working their rear ends off to try and make it work.”

Last month the European Commission launched legal action against the UK after it unilaterally extended grace periods on post-Brexit trading rules. Since then, there has been a tremendous amount of civil unrest across Northern Ireland which some commentators are associating with the disruption to business in the region since Brexit took place.

Local trade bodies based in Northern Ireland have recently stated that the reality on the UK side is very different to Prime Minister Boris Johnson’s official line on the situation., insisting that British officials have introduced bureaucratic fixes to help make the protocol work, respecting the legal requirements set out by the agreement.

Either way, Brexit talks and intracontinental wrangling is being elongated by those in office even after the actual exit from the European Union by Britain has long taken place, and that in itself is a reason for market volatility.

Couple that to some dissent among businesses that has resulted in a number of Belfast's populace taking to the streets, and those with an analytical bent will look toward considering some degree of commercial curtailment to be at the bottom of it, and commercial curtailment often causes market volatility.

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