Sterling fell to 4 week-lows against both the EUR and USD on Tuesday amid reports of a breakdown in Brexit talks between the United Kingdom and the European Union.
A Downing Street source claimed that the British Prime Minister Boris Johnson and the German Chancellor Angela Merkel had spoken. The source described talks between the pair as a ‘clarifying moment’ and that Brexit talks were on the brink of failure. The source added that a Brexit deal this month is ‘essentially impossible, not just now but ever’ due to Angela Merkel’s unreasonable demands to keep Northern Ireland in the customs union “forever”.
Following these reports, the President of the European Commission Donald Tusk took to Twitter to criticise Johnson. Tusk accused the British Prime Minister of playing a ‘stupid blame game’ with the future of the European Union and United Kingdom at stake.
Tuesday evening provided a slight recovery in sterling as Boris Johnson held emergency talks with Irish leader Leo Varadka to discuss the state of Brexit negotiations. Fears of Brexit talks collapsing seemed premature as a Downing Street spokesman announced that both sides continue to have a strong desire to strike a Brexit deal.
Demand for the EUR increased on Tuesday after a surprisingly positive German Industrial Production report.
Forecasts had projected a contraction of -0.3% for German Industrial Production. Instead, the data delivered a slight increase of 0.3% which suggests a degree of resilience remains within the German economy.
18.00 – USD: FOMC Minutes.