London RationalFX

RationalFX : Sterling unfazed by no deal scare

RationalFX : Sterling was unfazed by Boris Johnson’s announcement that the UK should prepare for a no trade deal on Friday.

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Optimism is building among investors that a trade deal will be reached and Johnson’s latest announcement could be a ploy in order for the EU to give into the demands of the UK according to analysts. 

The pound did drop sharply when Johnson warned that the UK should get ready for a no deal outcome, losing as much as a cent or 0.8%, but rebounded as he stopped short of announcing that the UK would walk away from the talks. Furthermore, EU’s most powerful leaders rushed to say that they wanted a trade deal and that talks would continue, though not at any price.

The pound is very sensitive to Brexit headlines at the moment and will remain volatile until a breakthrough has been reached. Negative interest rates and further economic damage due to lockdown restrictions are also a downside risk to sterling.
The dollar gained on Friday after positive economic data and concerns over a second wave of coronavirus cases globally led to an increase in demand for the safe-haven dollar.

Retail sales came in above the predicted forecast at 1.9% and suggested that the US economy was building momentum going into the last quarter of the year. The dollar still remains under pressure due to political uncertainty and whether a sizeable stimulus package can aid an economic recovery.


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