Pound takes knock amid Northern Ireland Brexit dispute

Lucy Harley-McKeown
·2-min read
Sterling was 0.6% lower against the euro by 9am in London, at its lowest level in more than a week.Photo: Dinendra Haria/SOPA/LightRocket via Getty Images
Sterling was 0.6% lower against the euro by 9am in London, at its lowest level in more than a week.Photo: Dinendra Haria/SOPA/LightRocket via Getty Images

The pound edged lower against the euro (GBPEUR=X) and dollar (GBPUSD=X) on Tuesday morning, as investors digested news of a long-anticipated legal challenge from Europe over breaches of Northern Ireland trading arrangements.

On Monday, the UK maintained that the changes it had made to the trading arrangements were "lawful," after the EU launched legal action against it.

The European Commission accused the UK of breaching international law concerning trade and pet travel between Northern Ireland and Great Britain following changes to the Brexit deal earlier this month.

Sterling was 0.6% lower against the euro at £1.15 by 9am in London, at its lowest level in more than a week.

It was also 0.6% lower against the dollar, hitting £1.38 — a one-week low.

The pound sank against the euro and dollar on Tuesday morning. Chart: Yahoo Finance
The pound sank against the euro and dollar on Tuesday morning. Chart: Yahoo Finance

The euro's rise comes despite renewed concern about the speed of Europe's COVID-19 vaccine rollout. Multiple European nations — including Germany, France, Spain, and Italy — have moved to suspend the rollout of the AstraZeneca vaccine in recent days following reports of blood clotting.

READ MORE: European stocks rise despite vaccine rollout concerns

As Brexit struggles rumble on, attention in markets will turn to the US Federal Reserve meeting on Wednesday, and announcements from the Bank of England (BOE) later in the week.

"Sterling has a very good run and is now having a pre-MPC wobble, on a morning when there really isn't an awful lot going on. This could go further," said Kit Juckes, macro strategist at Societe Generale. 

"Just as the biggest factor in sterling's favour in recent months has bene the fading of negatives, so the weakness is the lack of clear positive news. CFTC data showed non-commercial positioning flat at the start of December, and pretty long at the start of March. 

"Getting Brexit done and vaccine deployment improved the mood, and negativity around the economic outlook as reined in a bit. But what really helped was that through January and February, when euro positioning was clearly very long, sterling gathered longs of its own, and momentum."

One to watch in Europe today is ZEW's survey of economic sentiment in the Eurozone and Germany which could knock the euro off its rise, as a key measure of Europe's largest economy.

WATCH: Dominic Raab: Crystal clear that AstraZeneca/Oxford vaccine is safe