Brexit saga continues and risk for GBP amount as traders brace for major clash

A series of troublesome Brexit headlines have emerged in what has already been a volatile day in the forex space owing to the sensitivity to inflation worries and this notion that central banks are behind the curve. 

With that aside, however, specifically for the pound, ''Britain has begun preparations for a major clash with the EU by activating a key government committee to look at the fallout from suspending cooperation over Northern Ireland,'' Sky News has learnt and reported today. 

''Ministers are holding discussions inside the key cabinet committee, which oversaw Brexit fallout preparations, about the repercussions of triggering Article 16, which allows the UK to stop following some parts of the Northern Ireland Protocol.''

''The discussions on the practical implications of triggering the emergency mechanism in the Northern Ireland Protocol are being held in the "XO" cabinet committee, a pivotal institution inside government last year during Brexit talks when facing the threat of no-deal," the article said. 

In other news and related to the fallout, Britain said it had summoned France's ambassador in an escalating row over post-Brexit fishing rights.

"We regret the confrontational language that has been consistently used by the French government on this issue," said a statement from British Prime Minister Boris Johnson's office.

It added: "As a next step, the Foreign Secretary has instructed Minister Morton to summon the French ambassador."

The BBC wrote that ''Britain earlier denounced France's seizure of a British boat in French waters and warned Paris against further retaliation.''

The article continued,  ''A British trawler has been seized by France and another has been fined, amid an escalating row over post-Brexit fishing rights.

French maritime minister Annick Girardin said the ships were cautioned during checks off Le Havre overnight.

She said the first did not comply right away and the second was not allowed to fish in French waters so was detained.

No 10 said it was watching events closely and wanted France and EU talks but was ready to respond appropriately.

Earlier, the environment secretary said he was "urgently" investigating the situation in relation to the detained vessel - which has been named as the Cornelis Gert Jan.''

Market implications

It is well telegraphed that there are sticky and messy parts up in the air in the Brexit saga, most of which is likely already priced in, however, background stories and feelings of trouble escalation in the fall-out will leave the pound vulnerable. meanwhile, the markets are more aligned to what is happening between the central banks.

Sterling firmed a touch on Thursday against the euro and the dollar as investors assessed whether the Bank of England would proceed with an interest rate hike at the upcoming meetings or hold fire, given concerns around economic growth. Markets are pricing a chunky 34 cumulative bps in rate hikes rise from the BoE by year-end. GBP/USD is higher by some 0.4% on the day wheel EUR/GBP is also 0.4% higher following the ECB's emphasis on inflation pressures.