The pound to euro rate is trading at 1.1000 in early trading today as markets await the latest Bank of England (BoE) interest rate decision. The event could pass with little volatility as the BoE will likely wait until Brexit is resolved before taking action and that could be in an emergency meeting or announcement if required.
The Eurozone also sees the release of its latest inflation rate ahead of the bank’s announcement.
Brexit Comes Down to Fishing Fights as Politicians Head to Recess
The UK and the EU are set to continue Brexit talks with fishing rights set to dominate the final stages, but officials are cautiously predicting a successful outcome this week. The UK government will go into recess on Thursday, but Prime Minister Boris Johnson has said they could be recalled next week to approve any deal.
Negotiations over fishing rights are locked over the length of the transition period and the new rules and quotas that would apply. The UK has pushed for three years, while the EU wants longer.
Brexit supporter Nigel Farage was critical of the Prime Minister’s deal approach, saying that the result in many areas will be a “Brexit in name only”. Farage added: “The truth is the deal was done last October. Boris signed not a deal but a new EU treaty. That is what the withdrawal agreement is. What is happening now is we are talking about interpretation.”
BoE Likely to Hold off on Action in December Meeting
The Bank of England is expected to hold off on further stimulus today as it awaits the Brexit outcome. The expectation was that the BoE would move to negative interest rates in the event of a No Deal Brexit, but this is looking unlikely at present.
The BoE stimulus is comprised of a bond-buying programme at £895 billion, which was increased by £150 billion last month. Britain’s budget forecasters expect a No Deal Brexit to cause a 2% drop in Gross Domestic Product (GDP) and cause higher inflation and unemployment with additional public borrowing of £400 billion. The BoE has also asked banks for their input to negative rates and HSBC and Santander said they were not ready for that outcome.
The Eurozone inflation rate is expected to come in at 0.2%, which was the same level as last month, but the euro has continued rising and a lower reading can’t be ruled out.