For almost two years, the British pound has been tightly linked to the process of the UK withdrawal from the European Union. First of all, Brexit hit the British national currency. Market participants closely follow this confrontation and react instantly to any news related to negotiations on this issue.
A recent statement by EU chief negotiator on Brexit Michel Barnier sent the pound to new lows. Barnier, commenting on the results of the negotiations on the transition period, said that the parties failed to reach an agreement. After that, the pound took a downward swing. "The pound is pushing lower as the pendulum shifts from a soft to a hard Brexit. Some suggest a soft Brexit is indeed dead, leaving a hard or a very hard option. The pound should continue to trade lower on the crosses," says Neil Jones, an analyst at Mizuho Bank Ltd. In just a few days, the currency lost 2.2 percent and is on its way to the fastest weekly decline since October.
In any case, the economic consequences of Brexit will be severe. If the parties do not reach an agreement, the UK government will have to borrow more than 120 billion pounds ($167 billion) over the next 15 years. According to the Bank of England, Brexit "remains the most significant influence on, and source of uncertainty about, the economic outlook."
