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Rate Cut Chances Slim

• Posted by currencies in Bank of England, Bremain, Brexit, Currency, Dollar, Economy, EUR, GBP, Inflation, Mark Carney, Rate Cuts, Sterling, UK, Uncategorised
• January 23, 2020
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Possibilities of a Bank of England interest rate cut has faded as UK Businesses show greater optimism in January. Could a cut on 30th January be too soon? The economy could pick up over the coming months in accordance with yesterday’s CBI data showing far better than forecasted positive figures. Unlike the beginning of the year where we saw the Pound suffer losses in the region of 2%; GBP has recovered with strong labour and CBI data.

Purchasing Manager Index (PMI) figures will be released on Friday for the UK and this will give us further indications as to what is expected from January’s rate decision. Should the PMI data surpass expectation we will expect the Pound to rally even higher as this will further reduce the odds of a rate cut. However, on the other hand, negative figures could raise the question as to whether January would be time for a rate cut.

European Commission President Ursulla von der Leyen expressed the UK and EU will have to emphasise and prioritise parts of a trade deal which can be achievable by the end of the year, regardless of whether a finalised trade deal is agreed or not. Von der Leyen also mentioned “without an extension of the transition period beyond 2020, you cannot expect to agree on every single aspect of a new partnership”.

The end of the year does seem like a very optimistic deadline for a trade deal to be completed, especially considering it took 4 years for Canada and the EU to agree trade terms. Current sentiment for a trade deal looks very different to sentiment for Withdrawal Agreement. I.e. if every part of the Withdrawal Agreement hadn’t been agreed, nothing was agreed. Outlook for the GBP is strong providing parts of the trade deal are agreed on throughout the course of 2020.