EU issues warning to UK ahead of trade talks
Michel Barnier issued a stern warning to Boris Johnson yesterday ahead of the upcoming trade talks between the two sides. The EU’s chief Brexit negotiator told the prime Minister that the bloc won’t agree to a trade deal “at any price”. He also poured cold water on Mr Johnson’s hopes of securing a Canada-style trade deal, by saying that: “The UK will be the EU’s third-largest trading partner, almost 10 times bigger than Canada. At the same time Canada is some 5,000 kilometres away. It is clear that the rules cannot be the same.” The pound to US dollar rate dropped firmly below the 1.30 level yesterday following Mr Barnier’s comments.
Another bone of contention between the two sides is the EU’s insistence that Britain must adhere to its rules and regulations post-Brexit. The UK government wants a level playing field and has said it won’t accept rule-taking from Brussels. According to Downing Street: “The EU has respected the autonomy of other countries around the world in trade deals – we just want the same.”
Expectations of Fed rate cut reduce
The dollar was in a more upbeat mood yesterday compared to Tuesday, as investors scaled back expectations of a Federal Reserve (Fed) rate cut in response to the global spread of the coronavirus. According to Fed Vice Chair Richard Clarida, it is still too early to gauge if the impact of the epidemic will force a change in monetary policy. The rapid spread of the virus through the Middle East and Europe also saw traders retreat to the safe-haven dollar, forcing the GBPUSD pairing lower.
Sales of newly built homes in the US surged to their highest level in over 12 years in January. This positive news for a housing market that’s being supported by low interest rates could help to keep the longest economic expansion in history on track. According to the Commerce Department, new home sales leapt 7.9% to a seasonally adjusted annual rate of 764,000 units last month – its strongest pace of acceleration since July 2007.
The dollar is in for a busy day as it gears up for a slew of influential data, including core personal consumption expenditures, the Gross Domestic Product price index, durable goods orders, initial jobless claims and pending home sales.
The only data of note from the UK this week is released overnight: the GfK Group consumer confidence – which is forecast to increase slightly for February – is a leading index that measures the level of confidence in economic activity.
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