The British Pound pushed higher after investor sentiment improved due to the positive news that a deal between EU leaders have been reached. The euro also rose higher. The deal includes €1.8tn in spending, with a €750bn rescue fund to deal with the coronavirus pandemic. €390bn out of the €750bn will be made in grants.
Brexit trade negotiations a key driver for the pound
However, Sterling continues to remain under pressure as Brexit developments can thwart sentiment, while any updates from the Bank of England in relation to negative interest rates can also create further concerns.
Brexit negotiations will take place from Tuesday to Thursday and will cover such issues as trade in goods, fisheries, energy, transport and participation in certain EU programmes. The round will end with a plenary session on Thursday. The Brexit chief negotiator Michel Barnier will hold a press conference and investors will be watching to see any signs of progress regarding the latest round of EU-UK trade negotiations which will significantly boost Sterling.
Brexit trade deal and Tory rebellion
Boris Johnson faces a rebellion from Tories who want to pass an amendment to the Trade Bill that will allow the House of Commons and House of Lords to vote for a trade deal agreed between the UK and any other country.
After Brexit, the UK will need to renegotiate trade deals, something that has been celebrated by Brexiteers and criticised by Remainers. For many, such trade deals with countries like the US will sacrifice certain standards that were followed while the UK was under European legislation. After leaving the European Union at the end of this year, Britain will need to be extremely cautious when striking new deals that will be beneficial to its people rather than meeting the demands of political agendas. The government’s reluctance to allow its lawmakers and the people’s representatives to have a say in the negotiations, goes against its own promise of taking back control from Europe and giving it back to the UK people. Additionally, it denies any scrutiny and seeks to pass deals without a dialogue, enforcing laws that could have repercussions on the social and political lives of its citizens for years to come.
Post-Brexit trade talks on a standstill
EU officers have complained that trade talks have been “going round in circles”, and Downing Street said that “significant differences remain on a number of important issues.” This is what is also expected to be reiterated on Thursday when Barnier appears at the press conference, as both sides are anticipating a stalemate.
Another round of talks will begin the week of August 17, but Germany said that it won’t begin to focus on the negotiations until September.
Boris Johnson does not want talks to “drag on into the autumn”, but he will need to make some concessions to see any movement forward. “We’re waiting for the UK to move,” an EU official has said according to the Financial Times. Johnson has talked of trading with the EU like Australia, but he would need to secure a trade deal that will eventually confirm his competency as a Prime Minister and avoid a disorderly Brexit that could lead to calls for Scottish Independence.
If you are a business sending large amounts of funds abroad and are worried about currency 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.