The British pound fell to its lowest against the dollar since 1985, after investors realized that England’s Prime Minister Theresa May together with her administration will go through tough negotiations with the European Union regarding Brexit.
Brexit Secretary David Davis outlined “red lines for the U.K.”, which are positions that the Europeans are definitely going to reject – Britain renounces any contribution to the EU budget; jurisdiction of the European Court of Justice; free movement of labor; and any interference with British lawmaking. Needless to say EU officials reacted with a hardline position of their own.
The French president, François Hollande, said “There must be a threat, there must be a risk, there must be a price, otherwise we will be in negotiations that will not end well and, inevitably, will have economic and human consequences.”
The hopes for easy negotiations are slim, as both sides seem to take more protective positions. In meanwhile, as David Bloom, head of currency strategy at HSBC Holdings Plc noted, “The currency is now the de facto official opposition to the government’s policies.”