- Sterling dived after Michel Barnier said a deal on “transition is not a given.”
- The currency dropped close to 0.8% against the dollar on Friday afternoon.
- On Thursday, sterling spiked on news that the Bank of England is set to raise interest rates further in 2018.
LONDON – The pound has dived on Friday afternoon after Michel Barnier, the EU’s chief Brexit negotiator warned a transition deal between Britain and the bloc is ‘not a given’ if the UK remains inflexible on certain areas of negotiations.
“The UK insisted that we should reach an agreement in March on transitional period. However, at the same time, our partners set out a number of disagreements which I see as substantial,” Barnier said at a press conference in Brussels on Friday.
“To be frank, if these disagreements persist, transition is not a given.”
Those words spooked sterling investors, who sold out of the currency aggressively. By 12.30 p.m. GMT (7.30 a.m. ET) the pound was down by close to 0.7% against the dollar to trade just above $US1.38, as the chart below illustrates:
“It looks like it may be a torrid end to the week for sterling as it comes under renewed Brexit pressure,” Hamish Muress, a currency analyst at money transfer firm OFX said in an email.
Friday’s fall wipes out the gains seen by the pound on Thursday. Sterling surged after the Bank of England said that policy could be “tightened somewhat earlier and by a somewhat greater extent over the forecast period” if the economy continues to grow as forecast.
Sterling spiked above $US1.40 on that news, but quickly fell back, and then dropped even further after Barnier’s comments.
“Over half of the gains that the pound made since the start of the year against the dollar have been wiped out,” Muress added.
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