Sterling weakens as euro rises, Brexit risks linger

By Olga Cotaga
Sterling fell against the euro yesterday after the European Central Bank approved a bigger-than-expected expansion of its stimulus package, boosting the common currency.
The pound was also driven by the ongoing Brexit negotiations happening this week and by the late June deadline by which Britain needs to say whether it wants an extension of the transition period.
Just months after a first raft of crisis measures, the ECB said it would raise bond purchases by 600 billion euros to 1.35 trillion euros and that they would run at least until end-June 2021, six months longer than first planned, propping up the euro.
Worries that Britain will exit the European Union without a trade deal at the end of the year continued to weigh on the British currency.
"My sense is that the market is selling sterling again and this will continue this month on fear that we might not get a deal or an extension, so there are some preparations for a worst-case scenario -- Brexit without a deal, which is a possibility," said Neil Jones, head of European hedge fund sales at Mizuho.
A ‘no deal’ Brexit is not fully factored into the price of sterling at the moment, Mr Jones said. "It doesn't bode too well for sterling at the moment," he added.
(REUTERS)