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Trade Deal Talks Begin

• Posted by currencies in Bank of England, Bremain, Brexit, Currency, Dollar, Economy, EUR, GBP, No Deal, Prime Minister, Sterling, UK, Uncategorised
• February 25, 2020
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EU ministers will meet today to discuss how to open to trade deal negotiations, which will start on March 02.

They are expecting the mandate to be based on EU rules. The mandate will dictate how many EU rules that the UK will stick to secure a free trade deal. The main rules the Eu would like the UK to abide by is governing the environment, state aid and a few other issues.

The UK however are still aiming to achieve a Canada like deal given by the EU to Canada.

GBP/EUR is now trading around 1.1940 which means it has now fallen below the psychological level of 1.20. However, on the year the rate is 1% above where it was come the end of last year.

One of the reasons for the Pound’s advance is the relative outperformance of the UK economy over that of the Eurozone: the UK is seeing a post-election bounce in confidence while the Eurozone economy remains stuck in a low gear in part due to the effects of fears of the coronavirus

One of the reasons the pound is still high is due to the UK economy outperforming its expectations after the election.

Partnered with the EU economy still slow now due to the recent outbreak in the coronavirus. Even though, we don’t expect to see any effects of the virus for at least another quarter. For the same reason, the Fed reserve may be pressed to cut interest rates in June due to fears that economic growth may be impacted by the virus.

As I mentioned, it will take around a quarter to the notice the effect which means we will be able to see the impacts in time for a June decision. Also, US central bank officials has also said that it is too early to see how the coronavirus has eff3cted the US economy which is currently performing well.

Analysts are now expecting a rate cut in June by 25 basis points and a total of 50 BPS by the end of the year.