In stark contrast to the previous couple of weeks, GBP enjoyed relief yesterday and gained against all G10 currencies throughout the trading day. As we have written about on numerous occasions, sterling has two hurdles to overcome before we see a return to levels in years gone by. The obvious being Brexit, which has dominated news headlines since 2016 and how the future relationship with Europe will look come the end of 2020 and also, recently, how the economy will pick back up and return to a ‘normal’ level post-COVID outbreak.
Yesterday, there were reports from various outlets that the UK and Europe had made good grounds in the Brexit negotiations. In particular, Europe has agreed to make compromises on their demands for free access to UK fishing waters in 2021 and beyond. This has been one of the largest divides between the two sides since negotiations began. It is worth highlighting that these are just the preliminary concessions from the EU and there will be further negotiating points to work on moving forward. In turn, they will be expecting the UK to concede some ground elsewhere to make the deal possible. It is also being reported that now there is an improved optimism with the talks and potential for a deal to be agreed before the deadline of October, where the two would more than likely part ways to plan for a no-deal scenario.
Around lunchtime today, Chancellor of the Exchequer, Rishi Sunak, will deliver the UK’s summer economic update. Traders are not expecting any big surprises; however, they will be looking for any stimulus plan to boost the economy, in turn boosting GBP with it. The headline scheme will be a campaign to the tune of £2bn to create more jobs for 16-24-year olds. With a deep recession and high unemployment expected from the fallout of COVID, the British government has consistently reiterated their desire to help the country as much as possible.
At the time of writing GBPEUR is sat above 1.11 and GBPUSD is near 1.2550. Please reach out to your dedicated point of contact if you are looking to take advantage of the improved sentiment in the pound.
Have a great day,
Author: Jack Nicholls, Relationship Manager
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