GBP/EUR: Pound Points Downwards on Ongoing Brexit Fears

GBP/EUR has returned to its bearish stance on Friday, after advancing sluggishly since late Monday. Currently, the pair is trading at 1.1696, down 0.08% as of 6:15 AM UTC.

The pound is under pressure as investors still can’t figure out how the European Union will address the trade talks with the Conservative-led UK government. Recently, UK Prime Minister Boris Johnson ruled out any attempt to extend the Brexit transition period, so the two sides will have to find consensus until December 2020. Otherwise, the UK might end up with a no-deal withdrawal, which scares investors. The fears about such a scenario have dragged the sterling down to the lowest levels in a month.

Recently, British think tank Resolution Foundation said in a report that UK employment might decline next year, despite average wages being expected to increase to pre-crisis levels.

Torsten Bell, CEO at the Resolution Foundation, commented: “2019 was a bad year for the economy, which looks set to have recorded its weakest GDP growth outside of recessions since the war. However, the part of the economy that households really care about — the labour market — defied the economic gloom and delivered record employment and decent pay growth.”

However, the labor market is at a turning point right now, and several indicators are reflecting “clouds on the horizon.” For example, advertised job vacancies and unemployment among the young population have declined.

Bell added that the future was uncertain, though he anticipates that next year will be quite different from the last few years. While we may see a return to high wages, markets will experience a retreat from record employment.

The pound turned bearish after The Times published an article about the upcoming trade talks between the UK and the European bloc, which should start in two weeks. The newspaper said that the EU would threaten the City of London’s access to European markets. Besides, EU leaders will warn that they might introduce barriers to data flows that are essential to UK commerce.

The GBP/EUR pair will become more volatile when trade negotiations begin.

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