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British pound slips as investors await news of UK-EU sausage spat

By on June 30, 2021 0

* Chart: World exchange rates in 2020 http://tmsnrt.rs/2egbfVh

* Chart: Trade-weighted pound sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

LONDON, June 30 (Reuters) – The pound fell slightly at the start of London trading on Wednesday as investors waited to see whether Britain and the European Union would agree to extend the exemption from customs controls on shipments of chilled meat to Northern Ireland.

The current grace period for exemption from controls on UK-made sausages and other chilled meats shipped to Northern Ireland is due to end on Wednesday.

British Prime Minister Boris Johnson said on Tuesday that Britain plans to reach an agreement on extending the exemption soon.

Dubbed the ‘row of sausages’ because customs controls could have stopped the delivery of British sausages from Britain, monetary analysts say the post-Brexit dispute between Britain and the EU has taken until now little impact on the pound.

ING FX strategists wrote in a note to clients that low volatility means there are unlikely to be big moves in the pound, but “the market will take note of any progress on the tensions trade with the EU “.

“Here, a 3 month extension of the waiver on UK exports of chilled meat to Northern Ireland would be welcome.”

At 0746 GMT, the pound was down 0.1% against the dollar at $ 1.38305, holding near a one-week low and on track for its worst month since September.

Against the euro, it fell around 0.1% to 86.065 pence per euro.

Euro-sterling implied volatility indicators with one-month maturities were near their lowest since mid-2019.

After the US Federal Reserve’s surprise hawkish turn on June 16, the dollar strongly strengthened, penalizing the pound.

Cable hit a two-year high of $ 1.425 earlier this month, but since the Fed meeting it has mostly been in the $ 1.38 to $ 1.40 range.

Investors also face uncertainty over the spread of the Delta variant of COVID-19 in Britain, which forced the government earlier this month to delay the full reopening.

The government has announced that it will fully reopen pubs, restaurants, nightclubs and other venues on July 19.

Prices at UK retailers fell slightly faster in June than in May due to a fierce battle between supermarkets, but rising costs linked to COVID-19 and Brexit could soon worsen the rise in price. inflation, an industry group said. (Reporting by Elizabeth Howcroft, editing by Andrew Heavens)