Currency Note

Pound stronger as Brexit talks continue this week

By Christopher Nye December 14th, 2020

The pound has strengthened against the euro and the dollar on news that the UK and EU have given the go-ahead for Brexit talks to continue. Although key issues remain, there have been reports of “genuine progress” over the weekend. Despite this, the Prime Minister says that ‘no-deal’ is still the most likely outcome.

The Bank of England and the Federal Reserve will hold their monetary policy meetings this week. Whilst interest rates are expected to be kept the same, it will be interesting to see what BoE officials say about the current Brexit uncertainty. Fed officials are likely to comment on the surge of COVID-19 cases in the US and stimulus news.

As Brexit talks continue, we could see volatility for the pound over the coming days and weeks. Take this opportunity to make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your Business Trader on 020 7898 0500 to get started.

GBP: Brexit negotiations continue in Brussels

The pound has strengthened this morning on hopes that a Brexit deal can be achieved. Yesterday, the two sides agreed that it would be worth continuing with talks, despite sticking points remaining. Both the UK and the EU have not set another ‘soft’ deadline, which could suggest that talks will run right up to December 31 if necessary.

EU sources told newspapers at the weekend that there had been “genuine progress” in recent days. A UK source said that a deal “still has some legs”, however, the Prime Minister has said that a ‘no deal’ is the most likely outcome.

Talks will continue in Brussels this week, with the level playing field and fishing rights being the topics for discussion. Both the National Farmer’s Union and the British retail Consortium have warned of disruption if the UK is to leave the EU on WTO terms.

The Bank of England will release the minutes from their latest meeting on interest rates on Thursday. The rate is expected to be kept the same as officials wait for the outcome of Brexit negotiations.

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EUR: Flash PMIs on Wednesday

The euro looks weaker against the pound but stronger against the dollar at the start of this week. There will be a series of data releases for the Eurozone this week, including industrial production figures today, flash PMIs on Wednesday and inflation rate data on Thursday. These figures will indicate how the European economy has performed in November and December.

There will also be a series of speeches from European Central Bank officials this week, following their monetary policy meeting last week. They agreed to add to their stimulus programme in order to support the economy with its recovery from the effects of the pandemic.

USD: Stimulus talks and Fed meeting this week

The dollar is weak against the pound and the euro this morning, ahead of an eventful week. There are hopes that Congress will finally agree on a stimulus package to help the US economy before the Federal Reserve’s monetary policy meeting on Wednesday. Markets will be looking out for comments from House Speaker Nancy Pelosi and Secretary Steven Mnuchin on how the stimulus talks are progressing.

The Federal Reserve are due to hold their latest meeting on Wednesday and are expected to comment on how the US economy has coped with a surging number of coronavirus cases.

Retail sales data will also be released this week, assessing how consumers spent during November. Despite a surge in sales over Black Friday and Cyber Monday, sales are expected to have dipped overall in November.

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