Currency Note

Pound weaker on Brexit worries

By Carl Hasty December 18th, 2020

The pound is weaker this morning, though is still at strong levels against the dollar, as it continues to be driven by Brexit headlines. Both the Prime Minister and European Commission President confirmed yesterday that big differences remain between the UK and the EU, particularly over the issue of fishing rights.

The European Parliament has said that a trade deal would need to be agreed by Sunday for it to be ratified in time, but December 31 is still the only ‘hard’ deadline. Talks will continue in Brussels today.

Data released this morning shows that retail sales in the UK dropped by 3.8% in November as the nationwide lockdown hit the high street. Clothing stores suffered the most, while fuel also dropped as the lockdown impacted journeys.

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: Big differences remain between UK and EU

The pound is weaker this morning, but still at strong levels against the dollar. The Prime Minister spoke with the European Commission President and both sides have confirmed that big differences remain between the two sides. Boris Johnson has said that a no-deal is “very likely” unless the EU position changes “substantially”.

The European Parliament has said that they would not have time to ratify a deal before December 31 if it is not agreed by Sunday. However, Michael Gove said yesterday that there is a way around this, as they can “apply provisional application of the treaty”.

Reports suggest that fisheries is still the major sticking point to overcome. Downing Street also explained yesterday that with the level playing field, “fundamental areas remained difficult”.

The Bank of England announced yesterday that they would keep interest rates on hold at 0.1%. They also said that the outlook for the UK economy had evolved “broadly in line” with its latest forecasts published in November.

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EUR: Business climate figures to be released today

The euro is stronger against the pound this morning and is still at strong levels against the dollar.

Data released yesterday showed that Eurozone consumer prices fell for a third consecutive month by 0.3% year-on-year in November, which was expected. This was the steepest decline since April 2016, amid subdued demand due to the coronavirus crisis.

ECB official, Isobel Schnabel, commented on the state of the European economy yesterday. She said, “The progress we have made in overcoming these shared challenges should be reason for confidence. A crisis-proof and economically successful Europe provides the best arguments to counter euro-scepticism.”

Today, business climate figures for Germany will be released.

USD: A stimulus bill within reach?

The dollar is still suffering this morning as the optimistic ‘risk-on’ mood in the markets reduces the need for the world’s safe-haven currency.

A stimulus bill to help the US economy appears to be within reach, however, lawmakers are clashing over the role that the Federal Reserve will play. It’s thought that talks could go into the weekend, despite Congress stopping for Christmas recess from today.

The number of jobless claims in the US rose to 812.5 thousand in the week ended December 12th, from a revised 778.25 thousand in the previous period. This comes has the coronavirus pandemic continues to affect businesses in the US.

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