16/03 – EU/UK Brexit battle reignites

Jeremy Thomson-Cook
Jeremy Thomson-Cook 16 March 2021

GBP: Brexit legal challenge not helping

EUR: Waiting on the EMA

USD: Dollar not looking like it wants to take a step back


Sterling declined yesterday on the back of a legal challenge by the EU against the UK over Britain’s unilateral decision to delay implementing a key part of the Brexit deal relating to Northern Ireland.

Under the Brexit deal, Northern Ireland effectively stayed in the EU’s customs union and single market. Goods from the Republic of Ireland can flow freely in and out of Northern Ireland but checks need to be made on shipments from Great Britain. The UK government’s decision to delay those checks is a breach of the Brexit deal and could lead to financial or trade penalties for the UK heading forward.

We would not be surprised if there was also a little bit of backlash against the AstraZeneca jab in the sterling price too; more EU nations have postponed their use of the vaccine awaiting clarification from the European Medicines Authority as to the risks of blood-clotting in certain patient cohorts.


With most eyes in Europe fixed on the news around the AstraZeneca safety discussion and a wider increase in lockdowns it may seem strange that today could be a day for a wider move higher in the euro. German ZEW – a survey of business sentiment – should increase today and we think that anti-euro positioning may be looking overextended in the short term.

Something to keep an eye on in the next few days.

US dollar

The dollar is pretty subdued as the latest two-day Fed meeting begins later this afternoon. While most in markets will be focused on their hints around stimulus, support for the USD could come in upgraded growth forecasts that will also be published tomorrow evening.

As we noted yesterday, this may not be a week that you want to take on the USD.


The Governor of the Reserve Bank of Australia gave us a glimpse of the targeting that the central bank is looking for on wage growth as a key indicator of economic recovery. In a speech overnight, Philip Lowe noted that wages would need to be rising at 3% per annum compared to the current level of 1.4% before the amount of spare capacity or slack in the economy is taken up.

Current estimates suggest that may not come until 2024.

His notes came alongside his dismissal that wider increase in commodity prices would lead to sustainable inflation.

AUD is lower on the session as a result.

Market rates

Today’s interbank rates at 08:27 against sterling. Movement vs yesterday.

Euro €1.160 ↓
US dollar $1.383 ↓
Australian dollar $1.791 ↓
South African rand R20.61 ↓
Japanese yen ¥151.1 ↓

Have a great day everyone.