Pound Sterling Retreats from Euro and Dollar as Stock Market Exodus Continues; Uptrend Risks Coming Undone

Pound Sterling softened against the Euro and other major currencies Thursday as the government prepared to release details of its Brexit negotiating objectivesand as investors appeared to still favour safe-haven assets given the continued spread of coronavirus across the globe. 

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The Pound fell to the bottom of the major currency class Wednesday amid profit-taking prompted by renewed speculation of a delay to the March budget, which comes in addition to mounting coronavirus concerns and is further encouraging markets to price-in a Bank of England (BoE) rate cut for the coming months.

The British Pound remains well below its 2020 highs against both the Euro and U.S. Dollar with foreign exchange markets unwilling to push the currency higher amidst the global coronavirus market selloff and with just days to go until trade negotiations between the EU and UK officially start.

The British Pound was seen advancing against its rivals on the day EU states agreed a roadmap to a future trade deal with the UK, in which they require that the EU's standards should be "a reference point" to any trading agreement.

Foreign exchange analysts at Wall Street bank JP Morgan say they see "considerable downside" potential in the British Pound in the event of the UK and EU failing to strike a trade agreement at the end of 2020.

The British Pound starts the new week as an underperformer, recording losses against the U.S. Dollar which appears to be on the charge owing to a renewed bout of nerves concerning the coronavirus. However, against the Euro the UK currency looks relatively better supported with the market assessing the relative impact of the virus on the EU as being potentially more severe than will be the case on the UK economy.

Some potentially Sterling-supportive news out of Brussels ahead of the weekend is that the EU's latest draft mandate for EU-UK trade negotiations shows that the EU won't be pushing for 'dynamic-alignment'.

The British Pound has sold off against the Dollar and Euro over the course of the past 24 hours and we will be looking for signs of stabilisation heading into the weekend for confirmation that the weakness is a temporary phenomenon.