The possibility of striking a Brexit deal before the weekend has helped to stabilise the pound as it recovered some ground, on Thursday. However, tensions are building ahead of the weekend as talks continue. This means that any Brexit-related headlines will create pound volatility and move the market considerably.

The clock is ticking

While markets are hopeful that a deal will be reached, the fact that the clock is now ticking with little space for manoeuvres means that the pound will remain sensitive. The Telegraph reported that Barnier told EU ambassadors that the UK has become more flexible and lowered its demands in regard to UK waters post-Brexit, demonstrating that the two sides are closer to an agreement. Fisheries and governance remain unresolved, with the latter to be negotiated once all other agreements are settled. Talks could now focus on the percentages involved in fisheries, but France might prove to be uncompromising on its fishing demands. According to The Telegraph, "Fishing nations such as France, Denmark, the Netherlands, Belgium and Spain fear Mr Barnier may cave too easily to British demands as talks enter their endgame. Paris insists the UK red line of annual fishing negotiations is unacceptable.” France has already clarified that it will veto any deal that goes against their interests.

A report in The Times said that "France and other hard-line countries are pushing for no deal in Brexit talks to soften up Britain before a reset in negotiations next year, unless the government makes significant concessions in the coming days," and unless the UK "backs down over the next 48 hours", a period of 'no deal' will "bring a chastened Britain back to the table next year".

The BBC's Europe Editor Katya Adler said that Brussels believe a deal will be possible in the event that the UK makes significant steps to meet the demands regarding fisheries, competition rules and governance.

Talks continue in London

Negotiations are at the final stages, but it appears that any last hurdles will require, maybe not divine intervention, but at least some help from leaders from the UK, EU Commission and France. Both Wednesday and Thursday, saw negotiators working well into the night for the final push.

On Friday, The Telegraph reported that talks will find Boris Johnson and Emmanuel Macron coming head to head this weekend, with France interested in securing access to fish in British waters.

According to certain sources, Macron's officials have been "lobbying hard" among different member states to agree to added demands on fishing, state subsidies and non-regression clauses, and these will be discussed by both the PM and the French president over the weekend.

EU member states could also veto any deal as they continue to have concerns about state aid mechanisms and how to enforce agreed environmental and labour standards. France and Denmark are reluctant to lose their fishing shares in UK waters.

Indeed, there is not much time left now, as negotiations continue and the upcoming EU leaders’ meeting on 10 and 11 December 10-11 means that a final deal needs to be ready to be agreed. Sterling will make significant gains if a deal is announced in the coming weeks and it could potentially continue to rise.

 

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The pound appears to have risen ahead of the weekend, as Brexit negotiations continue. EU ambassadors have been told that a trade and security agreement with Britain is almost ready to be finalised as gaps on the contentious issues are “slowly shrinking.”

Both sides however remain inflexible, with European politicians saying that there remains work to be done and the UK saying that the EU needs to compromise. The risk of a no-deal Brexit in six weeks is still high.

According to a Bloomberg article, the UK “hasn’t moved sufficiently to overcome the main obstacles to a post-Brexit trade deal as three of the bloc’s leaders called for contingency plans to be stepped up in case there is no agreement.” Secretary General of the Commission Ilze Juhansone told envoys from the EU’s 27 member states on Friday that “negotiations could now slip into December as progress has been slow.”

On the other hand, the report noted that "The U.K. government has said that both sides have already made concessions on the three remaining areas of disagreement - access to British fishing waters, the level playing field for business, and how any deal is enforced - but that it’s up to the EU to make the final compromises."

A report on Reuters, stated that EU diplomats reported that “The European Union and Britain remain at odds in last-ditch trade talks over fishing rights, guarantees of fair competition and ways to solve future disputes, even though they are very close to agreement on other issues.” A senior EU diplomat told Reuters that “We are both close and far away. It seems that we are very close to agreement on most issues but differences on the three contentious issues persist.” Officials will continue negotiations online, as on Thursday it was announced that direct talks were suspended after a member of the EU team tested positive for COVID-19.

Negotiations are stuck

Negotiations have not progressed much as both sides remain unyielding on the main points: “Some things on the level playing field have moved, albeit very, very slowly. Fisheries are not really moving anywhere right now.” In terms of state aid, Britain has offered to set up a regulator for corporate subsidies, as the EU requested, but this was rejected as the body needed to be independent from the government and with a clear authority. Another EU official said that “negotiators mostly focused on such elements of corporate fair play as well as divvying up fishing quotas in recent days: ‘Both of these are still very stuck.’”

Pound Rises despite Brexit deadlock

The pound has risen against the Euro, Dollar and other major currencies, as negotiations continue. Markets remain confident that both sides will strike a deal despite the persistence of major differences. In the possibility of a trade agreement being reached the next two to three weeks, the EUR is expected to fall, something that will also be supported by positive news about a vaccine for Covid-19.

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Sterling extended earlier gains after a report that the UK and the European Union could agree on a trade and security deal some time next week. Optimism regarding striking an agreement has given the pound fresh impetus, despite that time is running out.

Economists believe that Sterling could strengthen more by mid-2021 if a free trade agreement is reached, as officials are expecting news of some form of progress as early as Monday. British and European parliaments will still need to confirm the terms of the agreement before the transition period ends on 31 December. At the moment, investors remain hopeful, but the possibility of the talks stalling as major differences cannot be bridged is strong, and in such a scenario the pound would likely fall.

Newspaper reports suggest a trade deal is possible

During the week, various newspaper reports have suggested that a trade deal is "just days away" with the Telegraph saying that Ireland believes there are "landing zones" for an agreement and that France has accepted the restrictions to its fishing rights in UK waters after the transition period ends. The newspaper also reported that "the trade agreement could be announced as early as Monday, sources in Brussels suggested – but only if both sides made compromises on issues such as fishing and subsidy law." On Tuesday, the Sun newspaper said a deal could be expected next Tuesday, as the UK Chief Negotiator David Frost said to the Prime Minister Boris Johnson to prepare for a trade deal on Tuesday, news that have helped lift the pound.

Despite positive but unofficial reports in British newspapers, both the EU and UK have not offered a definite answer about the status of the negotiations which means the possibility of a no deal is still a valid outcome with some analysts remaining very cautious. At the same time, the markets seem to have made peace with a possible no-deal scenario, so any news of a deal, no matter what that deal is, will lift the pound. However, a possible deal will only mean temporary and limited gains for the pound according to some analysts, while for others, a considerable rise should be expected.

Brexiteers feel stuck as no deal impossible

The UK is now trapped and will be unable to benefit from Brexit, said former Brexit Party MEP Ben Habib. Habib, who attacked the PM saying that a no deal Brexit was not possible, said in an interview to Express.co.uk, that "We are already stuck, to some extent, in the gravitational pull of the European Union.” For hard Brexiteer Habib, a no deal Brexit would allow the UK to completely cut its ties to the European Union, but, unfortunately, this is not possible anymore. As he said, "We have a deal of some description from which we simply cannot escape."

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A weak US dollar and rising hopes for a trade deal between the European Union and Britain helped Sterling rise on Tuesday afternoon.

Analysts are now saying that the pound could rise further in the event of a post-Brexit trade deal. This, of course, is something we have seen every time that there was any positive news pointing to a breakthrough to the negotiations. Sterling fell immediately after the UK referendum vote to leave the EU in June 2016, as political uncertainty hurt the pound. Since then, Sterling has been volatile every time news was released regarding Brexit and has fallen on news of a stalemate in the negotiations or disappointing updates from both sides. As we are nearing the end of the Brexit transition period, and the possibility of an agreement appears more certain, the pound will most possibly react positively and rise.

A possible agreement by mid-November will support the pound

Optimism regarding the trade talks has risen recently after the EU’s negotiating team and Michel Barnier the EU’s chief Brexit negotiator said that they will resume talks in London until Wednesday 28 October and many reports have noted that an agreement could be reached by Saturday, 31st October 31.

Any time from now until the middle of November, when a possible deal might be reached, Sterling could strengthen as long as the two sides ensure that a no deal scenario is not in the cards.

By reaching an agreement, both sides will provide certainty to businesses and investors, eliminating uncertainty, restoring sentiment and offering relief to the pound.

USD weakness to support the pound

For many analysts, the pound might rise, but this might not be a sharp rise and it will only be the result of a depreciation of the USD. At the same time, they predict that a strategic buying of Sterling in anticipation of a deal being reached might be possible, but this will be short-term.

According to Pound Sterling Live, Rabobank see potential for the GBP/EUR exchange rate to rise if a Brexit deal is announced, but such a rise will be limited.  Jane Foley, Senior FX Strategist at Rabobank said: "We don’t expect that relief at the end of the Brexit process will be sufficient to divert attention away from a poor set of UK fundamentals," she adds.

"If we are wrong on the market’s assigned relative probabilities, then Sterling will move more or less than we expect. Given the better mood music of recent weeks, risks appear skewed in favour of a smaller move,” Paul Robson, Head of G10 FX Strategy EMEA at Natwest Markets said. But they also highlighted the issues lying ahead, including that of companies having to adjust to the new realities after Brexit and the potential disruptions in various sectors, including the auto industry that were recently highlighted by the automobile sector.

Potential threats ahead

Economists are emphasising the fact that Brexit will not only disrupt various industries and create uncertainty about the future of businesses, but it will add to the UK’s existing problems. The economy is currently hit by Covid-19, government finances are deteriorating, and lockdown restrictions are hurting the economy further. With a weak economy and limited investment flows, the pound might have a rocky road ahead, with or without a Brexit trade deal.

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The pound was pulled from different directions yesterday, as on the one hand, the Bank of England hinting at negative interest rates pushed it lower, and on the other hand, positive Brexit news helped lift it.

The pound fell after the Bank of England said that it is considering how to use negative interest rates and it will discuss with regulators how to efficiently implement them. The pound dropped sharply after the announcement.

As quoted on Bloomberg, Valentin Marinov, head of foreign exchange research and strategy at Credit Agricole SA, said: “Negative rates are the nuclear option. It could ultimately push the pound into uncharted territory of losing whatever is left of its rate advantage.”

A Brexit Trade Deal is Still Possible

Despite the negative news, there was a glimpse of positivity on Thursday after the EU Commission President Ursula von der Leyen said that she remains "convinced" that an EU-UK trade deal is still possible, which helped the pound recover. Von der Leyen, speaking to the Financial Times, said: "I am still convinced it can be done. It is better not to have this distraction questioning an existing international agreement that we have, but to focus on getting this deal done, this agreement done - and time is short." Another EU diplomat said that "we should not overreact... We will continue negotiations because there are two separate tracks: one is the one which the UK has decided to violate, and the other is the future relationship."

If markets maintain a similar view that a trade deal is possible then the pound will be supported.

Bank of England’s Negative Interest Rate Surprise

After the Bank unexpectedly said that it was considering the possibility to cut interest rates to 0% or below in the coming months, to help support the economy, the pound fell.  There have never been any negative interest rates before in the UK and if the Bank moves ahead with changing the rates to record lows, this could really shake the financial system, especially due to the UK’s current account deficit. As Pound Sterling Live noted, this could leave “the UK's financial system, and Pound Sterling in particular, exposed to capital withdrawals from foreign investors.”

The shocking revelation was found within the Bank’s minutes to the meeting where it stated that it would start a "structured engagement" with the Prudential Regulation Authority in order to potentially cut interest rates to negative.

Senior market analyst at Western Union, Joe Manimbo said: "The U.K. Pound staged a swoon after the Bank of England dropped clear signals that it was edging closer to implementing negative borrowing rates. The big news was that officials were actively studying plans to push rates below zero given the ‘unusually uncertain’ economic outlook. Central bankers noted better data of late but signalled heightened concern related to Covid uncertainty, expectations of a sharp rise in unemployment and potential Brexit shocks."

However, some economists believe that the Bank will not push interest rates into negative territory and the recent news is part of the Bank’s research into negative interest rates rather than something more solid and definite.

But as Bloomberg said, a no-deal Brexit might just be the trigger for the BoE to use negative rates: “It’s becoming increasingly likely that if the economy is blown off course next year, the central bank could employ sub-zero rates.”

With the UK struggling to contain coronavirus infections, the imposition of new lockdown restrictions, unemployment and a disruptive Brexit could make the situation in the UK very difficult and push the Bank to make some hard decisions.

 

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The pound rose against the dollar on Wednesday, as the greenback was under pressure following the release of disappointing US retail sales figures for August.

The GBP/USD pair rose higher to weekly tops, despite the Brexit impasse and the latest saga with Boris Johnson’s Internal Market bill.

Wednesday's main event was the highly anticipated FOMC monetary policy decision - where rates look set to remain stable at near zero - and updated economic and inflation projections, ahead of Thursday’s BoE meeting. Due to the key FOMC event, trading opportunities and volatility around the GBP/USD currency pair might arise ahead of the event.

Brexit

The pound was also supported after Justice Secretary Robert Buckland hinted the Government could amend the Internal Market Bill in order to compromise with Tories criticising the PM for breaking an international treaty and avoid a rift within the Conservative party. The government’s change of heart could help soften the EU’s stance and resume negotiations with the EU.

Buckland said that the original plans in the Bill could be made "acceptable to all Conservative colleagues".

With investors digesting the political reality and remaining confident that a deal is still possible, the pound was lifted after the initial news of the Internal Market bill.

"Outsized moves in GBP ... have injected a sizeable risk premium in GBP. It's now trading at a decent discount on our short-term valuation, underscoring that some of the recent Brexit news has already been priced in. At the very least, this backdrop suggests that in the coming weeks GBP would benefit more from good news rather than sink further on bad news. We still expect more volatility but risk/reward favours taking profit at these levels," said Mark McCormick of TD Securities.

Bank of England Policy and Interest Rate Decision on Thursday

The Bank of England will try and assess on Thursday the UK’s economic recovery and whether it needs to adjust its policy to offer more monetary support. For many economists, now it is not the right time to make significant changes to its package. Adding to the Bank’s woes about the UK economy comes the UK inflation which fell to its lowest level in nearly five years, to an annual 0.2%, far away from the Bank’s official 2% target.

The Bank is expected to take action in its November meeting, as the economy slowly recovers. According to the Organization for Economic Cooperation and Development forecast released on Wednesday, UK gross domestic product would shrink by 10.1% this year, while the economy is forecast to rebound in 2021. Given the political and economic uncertainty, the BoE will possibly wait and see what kind of fiscal stimulus is necessary to support the economy. But Reuters noted that “While the central bank is widely expected to hold fire, policymakers are likely to conclude that downside risks to the economy are rising for the economy due to rising Brexit uncertainty and renewed restrictions on social activity.”

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The British Pound could strengthen against the Euro and Dollar in the coming weeks if economic data continues to beat expectations, according to the latest projections by economists. But, analysts at Bank of America have told clients on Tuesday that Sterling was more like an emerging market currency. Lead analyst Kamal Sharma said that the currency’s movements the last four years since the UK Brexit referendum have been “neurotic at best, unfathomable at worst.”

Pound: An emerging market currency

It is not the first time that the pound has been described as an emerging market currency. Last year, in September, Bank of England governor Mark Carney said that Brexit-related volatility had made the pound act like an emerging market currency.

According to this week’s reports, “Sterling’s spreads and implied volatility – the future range investors expect GBP to move in – remain far wider than other major world currencies, such as the U.S. dollar, euro or Japanese yen, and resemble something closer to the Mexican peso.” Brexit uncertainty and the possibility of negative interest rates have hurt investor sentiment, BoA analysts said.

Better than expected data could offer support for Sterling

But Pound Sterling Live stated that if UK economic data continues to come in better than expected the pound will be supported. It did note, however, that “those looking for a stronger Sterling will continue to have to exercise patience in the near-term.”

With recent economic figures beating expectations and markets underestimating how quick the UK’s economic recovery will be, there is a “decisive shift in momentum.” Tuesday’s PMI data for June were better than expected with the Markit/CIPS Manufacturing PMI at 50.1, the Services PMI at 47, and the Composite PMI at 47.6, all above forecasts.

According to analyst at DNB Markets Kjersti Haugland, things are even more positive as there is a significant rebound of the economy. He said: "A literal interpretation of the figures suggests that manufacturing activity stabilised in June while service sector activity fell further, as a reading below 50 indicates a contraction compared to the previous month. However, some of the respondents may make a pre-Covid-19 comparison instead. Therefore, the sharp increase in June suggests activity is picking up quicker than expected.”

The British Pound does well when the UK economy is growing, unlike the US Dollar which strengthens when the economy is in decline due to its safe haven status. So, if the UK economy continues to grow and economic data comes out stronger than expected, then the pound will find support. This coupled with an easing of lockdown restrictions and the opening of businesses will help the economy recover. As the PM Boris Johnson announced on the 23 June, pubs and restaurants, campsites, hotels and holiday homes will reopen on 4 July. Other businesses such as spas, nail bars, casinos and swimming pools will remain closed.

However, a stronger Pound might be a distant possibility for now, as Sterling was the worst performing currency the past month out of the G10 and was “near the bottom of the pack which reflects a short- to medium-term trend is in place against many major currencies and this will prove tough to crack.”

 

With Brexit uncertainty to continue due to the ongoing negotiations and the harsh stance of the Bank of England both on quantitative easing and interest rates, the pound will remain volatile.

If you are a business sending money abroad or an individual transferring your funds and are worried about the pound’s volatility due to the current market conditions, please get in touch with Universal Partners FX. UPFX’s dedicated foreign exchange specialists can help you transfer your funds safely and maximise the value of your money.

The latest release of the UK inflation figures has failed to provide a boost to the pound. Despite the recent Brexit optimism, the pound did not rise further after the latest inflation figures which came in line with expectations.

The GBP did not react to the news that inflation fell to 0.5% during May as it was expected. Sterling’s upside is also considered to be limited as traders are expected to remain cautious ahead of the latest monetary policy update by the Bank of England on Thursday. The BoE is expected to keep rates at 0.1% and increase its quantitative easing programme by £100bn.

UK CPI

According to the Office for National Statistics, the UK consumer price inflation eased for the fourth consecutive month in May, coming at an annual rate of 0.5%, meeting expectations. Inflation has fallen after a record fall in fuel prices which dragged the UK's inflation rate down. This was due to the lockdown as May was the second full month of the coronavirus lockdown restrictions. This was the lowest annual rate recorded since the Brexit referendum vote in June 2016.

Economists said that this will inevitably add to the discussions of whether the Bank of England will likely take Bank rates into negative territory.

ONS deputy national statistician Jonathan Athow said: “The growth in consumer prices again slowed to the lowest annual rate in four years. The cost of games and toys fell back from last month’s rises, while there was a continued drop in prices at the pump in May, following the huge crude price falls seen in recent months. Outside these areas, we are seeing few significant changes to the prices in the shops.”

Rising prices for food and non-alcoholic drinks helped offset the pressure from the falling oil and petrol prices in May.

What economists say

Economist James Smith explained that the UK inflation will stay below 1% this year:

“The other argument that is often made in favour of inflation returning, is that governments and central banks are pumping vast amounts of cash into the system. But this is unlikely to lead to higher prices, at least in the short/medium-term. In the case of the government, its spending has so far been solely aimed at keeping firms and consumers afloat, rather than trying to stimulate demand (which by definition, is constrained by the ongoing lockdown measures). The bottom line is that inflationary pressures are likely to remain fairly muted for the time being. This, in turn, will keep the pressure on the Bank of England to maintain its current degree of stimulus, and we expect a further £150 billion of QE to be unveiled this week.”

Chief UK economist at Capital Economics, Paul Dales, also said that "May's further fall in inflation is probably only the beginnings of a prolonged period of very soft price pressure." This he clarified, will drive MPC members to ask for more stimulus to boost the economy on the BoE’s policy meeting on Thursday.

For many businesses and consumers, the year ahead appears to be a very tough one, with more pressure on households. Businesses and employers have been hurt, and there is generally pessimism about the status of the UK economy due to the coronavirus and a possible second wave of Covid-19 cases.

If you are a business sending money abroad and are worried about the pound’s volatility due to the current market conditions, please get in touch with Universal Partners FX. UPFX’s dedicated foreign exchange specialists can help you transfer your funds safely, pay employees and maximise the value of your money.

The pound has regained its momentum since yesterday, after the positive news of new US Federal Reserve stimulus and the latest post-Brexit trade talks between the EU and the UK.

Sterling rose after Prime Minister Boris Johnson said yesterday that there is a "very good chance" a trade deal will be made with the EU. Both Johnson and the EU Commission President Ursula von Der Leyen agreed that there will not be an extension to the Brexit transition period, which will end on 31 December 2020. The pressure is now on both sides to agree on a post-Brexit trade deal, so the UK does not leave the bloc without a deal. If the UK leaves the bloc without a deal, then Britain will revert to World Trade Organisation terms, which will mean that the UK would have to pay high tariffs and quotas at a time when the country’s economy is dealing with the Covid-19 pandemic.

Fresh Momentum injected into the negotiations

According to Reuters, the hour-long video call on Monday between Johnson and the EU Commission’s von Der Leyen, “has injected fresh momentum” into the negotiations, as “people on both sides with knowledge of the conversation,” attested. The “EU inferred from Johnson’s contributions that he is willing to soften his position and European officials told him they are ready to do the same.” After the call, Johnson said: “I don’t think we are actually that far apart -- what we need to see now is a bit of oomph in the negotiations. The faster we can do this the better: we see no reason why you shouldn’t get that done in July.”

Obstacles Remain

Johnson’s latest communication with the EU comes after three months of trade talks which have ended in deadlock. However, things might not be completely resolved just yet, as EU Council President Charles Michel warned that the EU will not “buy a pig in a poke” as it was not in any hurry to reach an agreement. He said: “We won’t just speed up. We have to remain focused on content and consequences.” While the UK has been pushing to speed up the discussions, the EU wants to make reasonable steps, with the next discussions to resume on 29 June. Johnson explained that he is against the talks “going on until the autumn, winter, as perhaps some in Brussels would like.”

Both sides have failed to reach an agreement on a free-trade deal as well as find common ground when it comes to certain EU standards and demands regarding fishing rights and security which the UK believes are binding it to EU rules. Also, the UK continues to refuse to accept the power of the European Court of Justice to settle any disagreements between the two sides.

Pound Remains Unpredictable

With Brexit negotiations in the background, Paul Meggyesi, Head of FX Research at JP Morgan noted that the pound’s trajectory would remain unpredictable. He said: “GBP is liable to become ever-more idiosyncratic as the UK nears the business end of the entire Brexit process, the last six months of the transition period, with still a trade deal to be negotiated. This puts GBP at the mercy of unpredictable Brexit news flows, and investors should be prepared for potentially quite violent swings in GBP as the market tries to benchmark probabilities of the potential outcomes and eventually moves from valuing GBP on a probability-weighted basis to pricing a central scenario and then the eventual outcome itself.”

If you are sending money abroad and are worried about the pound’s volatility, please get in touch with Universal Partners FX. UPFX’s dedicated foreign exchange specialists can help you access the most competitive exchange rates and make your currency transfers stress-free.

The British pound is higher against the Dollar and lower against the euro on Friday, after the release of disappointing data showing that the UK economy contracted more than expected.

The UK GDP monthly release came at -20.4%% MoM in April vs. -18.4% expected, revealing that the economy contracted more-than-expected in April. This is the biggest month-on-month drop in GDP ever recorded and 10 times larger than the sharpest fall before Covid-19. The figures show that the GDP fell by 10.4% in the three months to April as a whole.

The Gross Domestic Product is released by the Office for National Statistics and is a measure of the total value of all goods and services produced by the UK. It is a broad measure of the UK economic activity and, in general, positive news such as a rising trend in economic activity can have positive impact on the pound, while a drop in numbers can be negative. 

The ONS reported that “April 2020 has experienced sharper falls than March as the negative impacts of social distancing and ‘lockdown’ have led to a significant fall in consumer demand and business and factory closures, as well as supply chain disruptions.”

 

Biggest monthly fall in UK history

According to the Office for National Statistics, the UK posted the biggest monthly fall in GDP in UK history this past April. The drop represented a 24.5% decline from April 2019, as lockdowns due to Covid-19 hit the economy. 

This week the Organisation for Economic Cooperation and Development (OECD) said that the UK economy would experience the worst damage from Covid-19 compared to any other developed nation. It predicted that GDP would contract by 11.5% in 2020 or 14% if there was a second lockdown due to the return of the virus.

Anneliese Dodds, Labour’s shadow chancellor, said that the OECD forecast was “deeply worrying” and that this was due to the government’s “failure to get on top of the health crisis, delay going into lockdown and chaotic mismanagement of the exit from lockdown.” 

Rishi Sunak, said the UK economy was similar “with many other economies around the world” and that the government’s intention was to “support people, jobs and businesses through this crisis – and this is what we’ve done.”

 

The OECD explained that “The failure to conclude a trade deal with the European Union by the end of 2020 or put in place alternative arrangements would have a strongly negative effect on trade and jobs.” A no deal Brexit would “significantly damage the UK’s potentially fragile recovery from its deepest recession in almost a century,” credit ratings agency Moody’s warned.

Laurence Boone, the OECD’s chief economist, said the world economy was “walking a tightrope” and that the possibility of a second outbreak could lead to another lockdown and recession. She said: “These scenarios are by no means exhaustive, but they help frame the field of possibilities and sharpen policies to walk such uncharted grounds. Both scenarios are sobering, as economic activity does not and cannot return to normal under these circumstances. By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments.” 

 

With the latest GDP figures, it has been confirmed that the slump in economic activity has been severe. The pound fell against the euro but was not shocked as the disappointing numbers were expected. As Sunak highlighted, the UK is not alone in experiencing the economic contraction due to the lockdown, as global economies are deeply hurt.

If you are sending money abroad and are worried about the pound’s volatility due to the current market conditions, please get in touch with Universal Partners FX. UPFX’s dedicated foreign exchange specialists can help you access the most competitive exchange rates and make your currency transfers stress-free.