Pound Tripped by not-so-new News that German Officials are to Avoid UK Counterparts

Pound Sterling took a dip after being hit by another Brexit-related headline.

Sterling was looking to extend its two-day gains against the Euro and US Dollar when it was struck by a Bloomberg report stating that German officials have said they have been told to shun UK contacts.

The news saw the Pound to Dollar exchange rate retreat back below 1.23 and the Pound to Euro exchange rate ease below 1.12.

This was a classic case of sell on the headline and buy on the substance.

GBPUSD getting hit as German officials told to shun UK contacts. The big freeze begins

— Boris Schlossberg (@Fxflow) October 19, 2016

While the German executive will continue receiving UK diplomats they are refusing to grant UK any favours in advance of official negotiations.

Nothing new here and we are surprised by the reaction.

We have been warning that Sterling is more sensitive to political headlines than data, so it is easy to see why anything Brexit-related would trump the solid employment data out on Wednesday.

Reports go on to say some ministers have been instructed to shun official contacts with UK that could reveal negotiating positions.

“German message to UK in private remains the same as in public - Merkel's core message to UK has been consistent,” says Ryan Littlestone at ForexLive who warns that Bloomberg headlines of late have been questionable on conjecture.

Nevertheless, it looks like this is just the kind of headline needed by the GBP bears to get back in the game.

We would not expect the impact on the Pound from these particular headlines to be lasting - but readers, stay alert!