Pound Falls On PM Johnson's Hard Talk On Future Trade Deal

By | February 3, 2020
Pound Falls On PM Johnson's Hard Talk On Future Trade Deal

The pound depreciated against its major trading partners in early European deals on Monday, as fears over a hard Brexit resurfaced after UK Prime Minister Boris Johnson warned that he was prepared to walk away from talks with the European Union, if he did not get a free trade agreement.

In a speech to business leaders and international diplomats in London, the PM said that he wanted a free-trade agreement similar to the terms the bloc has with Canada, imposing no tariffs or quotas on trade in goods.

Britian would be ready to take a looser arrangement like Australia’s if talks fail, he said.

Johnson said that he would not accept alignment with key EU rules, putting on a collision course with Brussels.

Setting for a showdown with the EU, Johnson threatened to walk away from talks if no agreement is reached.

The pound showed mixed performance in the Asian session. While it fell against the greenback and the franc, it held steady against the euro and the yen.

The pound dropped to a 4-day low of 141.57 against the yen, from a high of 143.11 hit at 8:30 pm ET. The pound is seen finding support around the 139.00 region.

Survey from the IHS Markit showed that Japan manufacturing sector continued to contract in January, albeit at a slightly slower rate, with a manufacturing PMI score of 48.8.

That’s up from 48.4 in December, although it remains beneath the boom-or-bust line of 50 that separates expansion from contraction.

The pound fell to 1.2590 against the franc, its lowest since January 21. The next likely support for the pound is seen around the 1.24 level.

The U.K. currency weakened to 1.3054 against the dollar, setting a 4-day low. Further drop in the pound is likely to test support around the 1.28 region.

The pound dipped to a 4-day low of 0.8478 against the euro from last week’s closing value of 0.8402. On the downside, 0.86 is possibly seen as the next support level for the pound.

Looking ahead, Markit’s U.S. final manufacturing PMI for January, construction spending for December and ISM manufacturing index for January are set for release in the New York session.