The British pound is lower against the US dollar on Monday afternoon after a newspaper interview with Sajid Javid, the UK Chancellor of the Exchequer kindled fears over Brexit. Elsewhere, US stock markets were closed for the Martin Luther King Jr. Day national holiday.
GBP/USD was lower by 14 pips (-0.1%) at 1.2995 with a daily price range of 1.296-1.301 as of 1.30pm GMT, sending the currency pair back below the 1.30 level widely-watched by traders.
The British pound sunk on the open of trading on Sunday evening and only begun to recoup some of the losses as Monday morning went on. The weekend comments from Chancellor Sajid Javid on Brexit were a reminder of the uncertainties that lay ahead in trade talks with the EU, which are set to begin as soon as the UK leaves the EU on January 31.
The Chancellor warned manufacturers that they would not be supported by the Treasury because they have had three years to prepare for trading in new ways after Brexit. Mr Javid told the Financial Times that there will be some winners and some losers when Britain leaves the EU. The main point of contention for industry will be where the UK choose to align with EU regulations and where it chooses to diverge.
A spokesperson for the Prime Minister later offered some additional clarifications about what the government will be seeking in trade negotiations, helping the pound rebound from its earlier losses. The main points were that “We are seeking a Canada-style free trade agreement” and “There will be no alignment with EU rules”. These are starting positions and there is still a good chance that the UK will align in many areas. Nonetheless, the harder the stance taken by the UK, the higher the risk that an agreement cannot be found, and Britain leaves the EU without a deal at the end of 2020.
No government statistics are being released in the US on the national holiday so with many traders away from their desks, US dollar volumes have been well below average.
