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The Vulnerable Sterling

  • Leader
    Nov 16
    Recently, the sterling suffered a sharp loss in the wake of the fact
    that the UK-EU trade talks are teetering on the brink of collapse. It
    comes because the UK is preparing to legislate to deal freely with
    Northern Ireland's freight under the expectation that a trade deal with
    the EU is beyond reach. Once it succeeds, products from Northern Ireland
    will have unfettered access to the UK's market without any customs
    declarations as the UK has the power to decide which goods are subject
    to EU tariffs, but the EU's subsidies involving Northern Irish firms may
    not be active.To get more news about WikiFX, you can visit wikifx official website.



    However, the above term is a breach of last year's Brexit deal, in
    which it was agreed that Northern Ireland would remain aligned to EU
    customs rules to avoid a hard border on Ireland. This was an important
    concession of the UK at that time, and the largest difference between
    the two parties was thus resolved. But now, the EU is likely to take
    legal actions over the UK's breakdown of the deal since an angry
    backlash has been provoked by Johnson, the British Prime Minister, who
    simply overrode the achieved deal after anticipating a failed
    negotiation.





      Over the past few months, the sterling has been gaining although
    there was no progress made in trade negotiations. The stalemate over the
    talks surprisingly sparked a rise in the sterling both because of the
    weak greenback and the expectation of financial markets on further
    negotiation. This time, however, the U.S. dollar has reclaimed its
    strength and the talks shall most probably break down.
      Currently,
    financial markets are worried about not only the Brexit with no trade
    deal, but last year's Brexit deal would all be overridden. That is, not
    just a trade deal is beyond reach, but a clean break from Europe is even
    possible, which will lead to a sustained sell-off of the sterling.
    Although there is a chance for US stocks to bounce back and again hamper
    the DXY, traders seem extremely worried that the UK would eventually
    adopt such hard Brexit. Thus at this stage, the sterling is not only out
    of momentum in the rebound, but may even struggle in panic selling.
    Unless a UK-EU agreement is achieved dramatically, the sterling is
    almost certain to be thrust into a vulnerable position.