Sterling Drops after Michel Barnier Says Transition Period of Brexit is ‘Not a Given’

On Friday, the value of the pound sharply declined against the dollar after the chief Brexit negotiator of the European Commission said that the bloc would not grant the United Kingdom a transition period if tensions in the negotiations continue.

Following the comment of Barnier, the sterling was trading at around $1.38 in the late afternoon which is lower by around 0.7 percent on the day against the US currency. Last Thursday, the pound had exceeded the $1.40 mark after the Bank of England kept the interest rates on hold but hinted that they could increase sooner than what was expected earlier.

Talking to some reporters in Brussels, Michel Barnier stated that a transition period for the United Kingdom post-Brexit was still “not a given.” He also said that “there will undoubtedly be a problem” if the United Kingdom chooses to sticks to its guns.

There are still some sticking points in the Brexit negotiations. The United Kingdom has demanded a power to oppose to the new rules that were imposed on it during the transition period, the restrictions on the rights of the citizens of the European Union who come to Britain during the transition, and the ability to opt in to some European policies.

The pound has experienced a stellar beginning to the year, and last year, it was one of the best performing major global currencies. However, the rally of the pound is exhibiting signs of stalling.

A poll that was published by Reuters last Thursday revealed that forecasters now generally consider that concerns will begin weighing on the value of sterling afresh.

On average, forecasters said that they expect the pound to be changing hands at about $1.40 in one month, $1.39 within six months and back at $1.40 in one year.