Over most of yesterday’s London trading session, the pound continued to look wobbly in the face of a dominant euro; despite this, it did manage to rebound its intra-day losses against the dollar by close of trading, as markets regained their risk-on nerve. Essentially, Wednesday served up more of the same with regards to continuing fears of a no-deal WTO terms departure from the EU, as reports once again suggested that the UK Government is now fully aware a fully comprehensive deal will not be done in time. However, what caused the large dip on GBP/USD was a Financial Times article which suggested that a trade deal between the USA and the UK was now also in jeopardy, as the United States Government was too tied up with civil unrest, a faltering COVID-19 response and an impending presidential election.
Although markets managed to recover from the dip caused by the news, mainly through continuing dollar flight globally; sadly for the UK Government, a quick win on a UK/US trade deal was meant to soften the blow of leaving on a ‘bare-bones’ agreement with the EU in the longer term. The news that this may now not be the case means that an additional pound anxiety is added to a basket already brimming with trade fears as we approach the end of the transitional period. In short, unless the EU gives ground – and quickly – the door is open for the UK to walk into WTO terms come December the 31st with precious little cushioning for the already Covid battered economy to fall back on.
Have a great day.
Author: Joshua Haden-Jones, Senior Relationship Manager
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