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RationalFX : Sterling remains volatile

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RationalFX : GBP erased early gains against both EUR and USD on Wednesday as the European Commission President warned the UK that there is not enough time for a full UK-EU deal by the end of 2020…

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Sterling opened Wednesday’s session on the front foot and moved to a high of 1.3165 against USD and 1.1823 against EUR. This move was a result of investors returning to sterling from the traditionally more safe haven currencies, as market expectations of further escalation in the US-Iran conflict were low.

GBP was back under pressure as the European Commission President Ursula Von Der Leyen met with Boris Johnson at Downing Street yesterday to open UK-EU trade talks, stating it was ‘virtually impossible’ to assume a trade deal will be agreed by the end of the year.

This was echoed by European Central Bank policymaker Klaas Knot, who commented that a ‘hard Brexit at the end of 2020 remains a possibility’.

With Johnson reluctant to grant an extension to the transition period at the end of the year, concerns remain that the time frame left to negotiate a deal with the EU is too short, and that the UK could revert to World Trade Organisation rules. A move which would be undesirable for the UK economy and GBP.

Bank of England Governor Mark Carney hinted to future rate cuts.

In a recent interview, Carney commented that the monetary policy is not a spent force and that his successor, Andrew Bailey, has the tools to cut interest rates from 0.75% to 0% if necessary.

Carney also went on to suggest that the global economy is heading towards a liquidity trap, which will undermine the effectiveness of central banks to avoid a future recession.

Key Announcements 

EUR – 10:00am – Unemployment rate Nov – Previous 7.5% Expected 7.5%.

USD – 13:30pm – Initial Jobless Claims – Previous 222k Expected 220k.

GBP – 15:30PM – BOE Governor Mark Carney.

Source : ETFWorld.co.uk

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