Saudi Press

Saudi Arabia and the world
Friday, Aug 22, 2025

Brexit Dread Is Ripping Through U.K. Markets Once Again

Brexit Dread Is Ripping Through U.K. Markets Once Again

Fears of a no-deal Brexit have come back to haunt the U.K.’s financial markets.

With the relationship between the European Union and Britain reaching a new level of discord, investors hammered the U.K. currency with an intensity that hasn’t been seen since the height of the coronavirus pandemic in March.

Money market investors are stepping up bets the Bank of England will cut rates below zero for the first time in its 326-year history, and options markets are pricing in the likelihood of deeper losses for the pound. Excluding mid-March, the week will be recorded as sterling’s worst selloff since 2016.

“Brexit is back like a bad rash,” said Ned Rumpeltin, head of foreign-exchange strategy at Toronto-Dominion Bank in London.

And that’s not the only thing worrying investors. The coronavirus is spreading rapidly once again in the U.K. and there’s concern companies will slash hiring if the government’s wage support program expires at the end of next month.

Here are the key moves in U.K. markets:



Sterling sank 3.7% in the week to $1.28, the lowest since July 23. The weakness is even starker against the euro, which strengthened after European Central Bank President Christine Lagarde seemed unfazed about the currency’s recent rally. At 92.58 pence versus the euro, the pound is near some of the highest levels seen over the past five years.

At stake is whether the EU and U.K. can negotiate a trade deal before time runs out. Talks between the two sides were thrown into crisis this week after Prime Minister Boris Johnson’s government proposed breaking international law to re-write the Brexit divorce accord.



Traders turned to options to hedge against the possibility of future volatility in the pound. Risk reversals, a gauge of market positioning and sentiment, show a steep increase in bearish sterling bets.

“Brexit is back -- and hard,” said Jordan Rochester, currency strategist at Nomura International Plc. “It’s becoming very difficult to see the light at the end of the tunnel,” he said, predicting that the pound could slump to $1.18 if there’s a chaotic break from the EU.



With Britain’s economy far from pre-pandemic levels, negative interest rates are still a hot topic of speculation and traders will be closely studying any comments after the Bank of England’s meeting on Thursday for any clues.

Money markets on Friday priced in a cut below zero as soon as February and see a reduction of almost 20 basis points by the end of next year. As recently as Monday, traders were factoring in rates remaining above zero until September 2021.



Investors have also started snapping up protection against faster inflation, which could be triggered by the pound’s devaluation in a messy Brexit. The premium on short-dated U.K. breakevens rose 25 basis points over the U.S. during the week, the biggest increase since March.

“U.K. breakevens have performed very well at the front-end and that’s to do with no-deal Brexit risks being priced into the market,” said Daniela Russell, head of U.K. rates strategy for HSBC Holdings Plc.



Some parts of the bond market still seem calm despite the fractious U.K. and EU relationship. In previous times of stress, traders sold Irish bonds, sometimes against French debt, because of the country’s close ties and vulnerability to the U.K. economy. The spread widened by about two basis points in the week, a relatively small move.

Coming Up Next Week:


  • Euro-area bond issuance is scheduled from Germany, France and Spain, and is set to total almost 20 billion euros ($24 billion), according to Commerzbank AG strategists, who write that “most countries should be able to cope with their remaining funding needs via regular auctions”
  • The EU may issue bonds related to its unemployment support program SURE, according to Danske Bank A/S, which expects a 10-year bond sale to raise up to 10 billion euros
  • Finland pays over 6 billion euros of redemptions, coupons and Italy pays about 1.5 billion euros of coupons
  • The U.K. will offer a combined 7 billion pounds ($9 billion) of seven-, 10- and 17-year bonds next week and the BOE will buy back 4.4 billion pounds of debt across three operations
    • Euro area data is mostly second-tier, backward-looking, with the exception of Tuesday’s German ZEW survey figures for September
    • August inflation, retail sales and unemployment numbers are due in the U.K.
    • ECB speakers are thin on the ground with Robert Holzmann and Olli Rehn speaking on Wednesday and Thursday respectively
    • S&P Global Ratings reviews Spain and Belgium, Moody’s Investors Service reviews Spain and the EU and DBRS Ltd. reviews Portugal on Friday
Newsletter

Related Articles

Saudi Press
0:00
0:00
Close
Dogfights in the Skies: Airbus on Track to Overtake Boeing and Claim Aviation Supremacy
Tim Cook Promises an AI Revolution at Apple: "One of the Most Significant Technologies of Our Generation"
Are AI Data Centres the Infrastructure of the Future or the Next Crisis?
Miles Worth Billions: How Airlines Generate Huge Profits
Zelenskyy Returns to White House Flanked by European Allies as Trump Pressures Land-Swap Deal with Putin
Beijing is moving into gold and other assets, diversifying away from the dollar
Cristiano Ronaldo Makes Surprise Stop at New Hong Kong Museum
Zelenskyy to Visit Washington after Trump–Putin Summit Yields No Agreement
High-Stakes Trump-Putin Summit on Ukraine Underway in Alaska
Iranian Protection Offers Chinese Vehicle Shipments a Cost Advantage over Japanese and Korean Makers
Saudi Arabia accelerates renewables to curb domestic oil use
Cristiano Ronaldo and Georgina Rodríguez announce engagement
Asia-Pacific dominates world’s busiest flight routes, with South Korea’s Jeju–Seoul corridor leading global rankings
Private Welsh island with 19th-century fort listed for sale at over £3 million
Sam Altman challenges Elon Musk with plans for Neuralink rival
Australia to Recognize the State of Palestine at UN Assembly
The Collapse of the Programmer Dream: AI Experts Now the Real High-Earners
Armenia and Azerbaijan to Sign US-Brokered Framework Agreement for Nakhchivan Corridor
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
WhatsApp Deletes 6.8 Million Scam Accounts Amid Rising Global Fraud
Nine people have been hospitalized and dozens of salmonella cases have been reported after an outbreak of infections linked to certain brands of pistachios and pistachio-containing products, according to the Public Health Agency of Canada
Texas Residents Face Water Restrictions While AI Data Centers Consume Millions of Gallons
Tariffs, AI, and the Shifting U.S. Macro Landscape: Navigating a New Economic Regime
India Rejects U.S. Tariff Threat, Defends Russian Oil Purchases
United States Establishes Strategic Bitcoin Reserve and Digital Asset Stockpile
Thousands of Private ChatGPT Conversations Accidentally Indexed by Google
China Tightens Mineral Controls, Curtailing Critical Inputs for Western Defence Contractors
OpenAI’s Bold Bet: Teaching AI to Think, Not Just Chat
BP’s Largest Oil and Gas Find in 25 Years Uncovered Offshore Brazil
JPMorgan and Coinbase Unveil Partnership to Let Chase Cardholders Buy Crypto Directly
British Tourist Dies Following Hair Transplant in Turkey, Police Investigate
WhatsApp Users Targeted in New Scam Involving Account Takeovers
Trump Deploys Nuclear Submarines After Threats from Former Russian President Medvedev
Germany’s Economic Breakdown and the Return of Militarization: From Industrial Collapse to a New Offensive Strategy
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
President Trump Diagnosed with Chronic Venous Insufficiency After Leg Swelling
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
Iranian President Reportedly Injured During Israeli Strike on Secret Facility
Kurdistan Workers Party Takes Symbolic Step Towards Peace in Northern Iraq
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Russia Formally Recognizes Taliban Government in Afghanistan
×