Yesterday it appeared that Sterling exchange rates were shrugging off the recent downbeat updates regarding Brexit negotiations. The pound traded up against most major currency pairs throughout the day as hopes remain that a Brexit breakthrough will be found in terms of a trade deal agreement between the UK and EU negotiators.
So far the UK has struck deals with a number of nations but the focus at the moment within the financial media is on the trade talks between the UK and EU, as the EU is the UK’s main trading partner. Updates from the talks, especially from key figures within the negotiation process are having an impact on the pound’s value as they have done for the past few years now.
With the UK having left the European Union this year, and the current transitional deal expiring at the end of this year, it’s crunch time for the UK although the Conservative government refuses to give much ground and maintains that it will be willing to walk away without a deal in place.
Sterling exchange rates this morning have dropped off, with the pound to euro rate breaking below 1.10 and the pound to US dollar rate dropping below 1.30. These have both been significant levels of support and resistance for the pound recently as the pound has begun to trade within thin ranges, especially the GBPEUR rate.
Perhaps the reason for the drop off this morning is due to a junior business minister for the government suggesting that UK Prime Minister Boris Johnson sees no point in talking with EU regarding a Brexit deal until the EU gets serious, and views the UK as a sovereign state.
Could COVID-19 Measures Also Negatively Impact the Pound’s Value?
It’s been reported this morning that the pace of the UK’s economic recovery since the national lockdown earlier this year has begun to slow, and through September, growth was weaker than in previous months. The good news is that the growth outstrips the national rate of recovery but with the number of Coronavirus cases increasing and local lockdowns taking place throughout the country at the moment, there are concerns that another major lockdown could scupper the UK’s recovery prospects.
With growth rates faltering within the UK there are now expectations for the Bank of England to implement further financial stimulus measures next month, to try and aid the financial recovery.
There are also internal cracks appearing with the Mayor of Greater Manchester, Andy Burnham seemingly unwilling to put Manchester into tier three COVID restrictions. The leaders of Manchester have now been given a deadline of midday today to reach a deal with the government regarding these measures as Andy Burnham has requested that sufficient support will be offered by the government to ensure those that need assistance receive it.
The Pound has been relatively unchanged in recent weeks despite some new lockdown measures, but if there is another national lockdown there could be a different outcome, as we saw towards the beginning of the year when lockdown measures were first implemented.
GBPUSD fell to a 35-year low when the magnitude of the COVID-19 virus first surfaced and national lockdown measures were announced. The pound to euro exchange rate also fell as low as 1.0530 which is around 5-cents from current interbank level so if panic sets in again I think those of our readers with a Sterling currency requirement should be aware of this.
Economic updates are very light today but tomorrow could be a busy time for GBP exchange rates due to the large number of economic updates set for release. Public Sector Net Borrowing, Consumer Price Index, Retail Price Index and House Price data will all be released early tomorrow morning, and then just after midday the Bank of England’s David Ramsden will be speaking.
Negative interest rates have been touched on recently by the Bank of England (BoE) as a measure available to use, if needed to aid economic growth so any references to this could impact Sterling exchange rates especially as it would be a first from the BoE. Rates are currently 0.1% which is a record low. Get in touch using the form below to discuss these factors, and the tools available to limit your exposure to the quickly changing currency markets.