GBP rallies continue to fall victim to the market bears, proving little in terms of sustainability. It has been a rollercoaster of a ride for the pound across the board, with GBP/USD once again giving up the psychological 1.3000 mark.
Today the pressure came into play on the back of reports suggesting that the EU is set to aim for the City of London financial industry with a MIFID 2 rewrite. As some background information; MIFID is a set of financial market regulations that most developed countries signed up to after the financial crisis of 2008/9. They did this to try and avert a future financial crisis.
Here it looks like the EU might be trying to tweak the rules to favour EU financial institutions at the expense of UK firms. This is European financial centres (Paris, Brussels, Frankfurt) trying to steal business from London. The UK's financial services sector is one of its most globally competitive and vibrant sectors. Losing much of it to the EU would be a HUGE hit to the UK economy. Stories like these are unlikely to bode well for UK/EU trade negotiations.
As a recap of the ride GBP/USD has been on over the last week:
Thursday 30 Jan - GBP/USD spiked aggressively higher on a not so dovish Bank of England, moving above 1.3100.
Friday 31 Jan - GBP/USD pushed further north above 1.3200, thanks to broad USD weakness.
Monday 3 Feb - GBP/USD was slammed back under 1.3000, after reports detailed that PM Johnson will set out a "hard-line" stance on post-Brexit trade talks with the EU, adding that he believes there is "no need" to accept various EU rules and regulations and will be prepared to walk away from negotiations if he is not happy with the deal.
Tuesday 4 Feb - GBP recovered pushing back towards 1.3050, a technical correction but also stronger Construction PMI.
Wednesday 5 Feb - GBP further hit a forced to trade under 1.3000 again on EU is set to take aim at the City of London financial industry with a MIFID 2 rewrite.