Sterling touched six-week lows against both the U.S. dollar and the euro on Wednesday morning after the U.K. revealed plans to renege on its Brexit withdrawal agreement with the EU.
The new legislation, dubbed the Internal Market Bill, sets out to amend the ways in which the British government can exercise authority over trade in its various jurisdictions, altering the existing Withdrawal Agreement signed in January. The government's Northern Ireland minister acknowledged on Tuesday that the move will break international law.
It will undoubtedly sour the eighth round of trade talks that commenced this week, and has raised the possibility of the U.K. leaving the EU without a free trade agreement in place when the Brexit transition period expires at the end of the year. Rochester said the 3% fall for sterling is "nothing in the grand scheme of the pound," and highlighted that the EUR/GBP pair is yet to breach its recent ranges, in which Brexit was not a factor. In the near-term, Nomura is looking for EUR/GBP to climb to 0.92.
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