EU agrees UK trade negotiations mandate
The pound to US dollar rate interbank exchange mounted a recovery yesterday, having dipped below the 1.29 level on Monday. The pair was propelled upwards by the approval of the EU’s mandate for post-Brexit trade talks with the UK by its General Affairs Council. The document will provide a road map for the negotiations, which are to be carried out by the EU’s chief negotiator, Michel Barnier. Crucially, it states that EU standards should act as “a reference point” in any future trade agreement. Meanwhile, UK ministers have agreed the government’s mandate for the negotiations, which kick off on March 2nd.
The GBPUSD rate was also profiting from the pound’s apparent resilience to the impact of the coronavirus outbreak. So, why is the currency largely immune to the resulting global investment trends? A string of positive post-election economic data and hopes that the March Budget will paint a picture of fiscal dynamism for the UK in 2020 are largely responsible.
US Consumer Confidence rises slightly
While the pound was advancing, the dollar was digesting the latest US consumer confidence figure, which rose less than expected in February. The index came in at 130.7 – up from 130.4 in January – well below the forecast print of 132.6, as people’s assessment of current conditions wavered.
Meanwhile, expectations continued to grow that the US Federal Reserve (Fed) will cut interest rates this year to relieve the economic pressure caused by the coronavirus outbreak.
Speaking at the National Association for Business Economics conference in Washington yesterday, Fed Vice Chair Richard Clarida said the central bank is “closely monitoring” the escalating coronavirus outbreak and its impact on the US economy. However, he believes that it’s still too soon to determine if a change in monetary policy is required.
The US housing price index rose 0.6% on a monthly basis in December, following November’s 0.3% increase, while the economic research company S&P/Case-Shiller’s 20-metro area home price index came in at +2.9% on a yearly basis in December. The dollar largely ignored the readings.
Following the release of the new home sales figure today, attention turns to a slew of significant US data tomorrow, including the latest GDP reading.
A quiet week on the economic data front for the pound means investors will continue to monitor the build-up to the UK-EU trade talks, which commence next week.
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