The outlook for the Pound Euro (GBP EUR) exchange rate darkened today as markets reacted to news that Wall St is warning the point-of-no-return in Brexit negotiations is fast approaching.
Wall St Warns of Job Loss if Brexit Negotiations Don’t Pick Up – GPB EUR Tumbles
A group of Wall Street’s pre-eminent banking houses warned US Commerce Secretary Wilbur Ross recently that unless Britain makes quick progress on securing a transition deal, or at least provides clarity on what a deal might look like, then banks might have to begin moving jobs overseas.
Banks like JPMorgan Chase, HSBC, and Goldman Sachs were in attendance at the meeting, all stressing that the point-of-no-return is fast approaching and that without demonstrable progress, the banks would be forced to engage various ‘worst-case’ scenario contingency measures – a prospect that could result in thousands of job losses in the UK.
Catherine McGuinness, Policy Chair of the City of London Corporation elaborated:
‘The fear of a crash-out is rising. We need action, not warm words. We really need progress […] we really shouldn’t understate or underestimate what a critical moment we’re at for this sector’.
The Bank of England (BoE) has previously asserted that it is aware of the possibility of losing some 10,000 jobs in the eventuality of a cliff-edge Brexit, though Deputy Governor at the bank, Sam Woods, has since claimed that a longer-term figure of 75,000 job losses is also plausible.
Brexit negotiations are set to resume for the next phase on Thursday, and if sufficient progress is not demonstrated into next week then the bank’s warnings could inch closer and closer to realisation.
This outlook weighed on the GBP EUR exchange rate, amplified perhaps by this week’s sparse eco calendar for the United Kingdom.
EUR Exchange Rate Outlook Sluggish on Mixed Data
On the Euro front, markets continue to digest yesterday’s run of mixed data releases, with retail sales in the Eurozone smashing expectations by printing year-on-year at 3.7%, up from the previous period’s 2.3% and the forecast of 2.7%, but industrial production in Germany disappointing by sliding monthly by -1.6%, down from the forecast of a 0.8% climb.
The latter marked the largest drop in German industrial output since December 2016.
The single currency is also operating on slim pickings in the eco calendar today, with the primary drivers being political developments, global risk sentiment and the current strength of the US Dollar (USD) which is presently retaining its lead over the Euro.
One notable release, however, has been today’s trade figures for France, which demonstrated a trade deficit expansion from €4.2bn to €4.7bn in September, only inches away from the €4.8bn forecast.
This did little to perturb the Euro, however, which continued to retain its lead over the Pound
Brexit Negotiations Resume Tomorrow – Could Sterling (GBP) Regain the Lead?
Brexit negotiations are due to resume on Thursday, with Sterling investors keen to see some form of progress made.
The current sticking-point, however, remains Brussel’s refusal to move onto trade talks until the UK makes a concession on the substantial divorce payment figure.
The UK has, however, insisted on not revealing their hand in this manner, as it could potentially disadvantage them moving into the next phases.
Markets will be watching carefully for any indication from either side that progress is being made, with positive comments like those made by May at the recent CBI conference in London liable to put the Pound on the forward foot and the continued absence of progress liable to weigh on GBP EUR.