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Pound Plummets

• Posted by currencies in Bank of England, Bremain, Brexit, Budget, Currency, Dollar, Economy, election, EUR, GBP, Mark Carney, No Deal, Prime Minister, Referendum, Sterling, UK, Uncategorised
• February 27, 2020
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GBP

The Pound fell due to renewed speculation of a delay of the March budget which comes in addition to mounting coronavirus concerns and is further encouraging markets to price in a Bank of England rate cut in the coming months. The government could now put off plans to increase its spending due to uncertainty over economic outlook. The UK may also cut interest rates to align with the Euro and US Dollar – should the UK cut rates or hint cutting we may see Pound fall.

Negotiation mandate has been approved for UK trade talks with the EU and guidelines have been set out for future negotiations. Next week the trade negotiations will commence, and the EU have stated that it will be a tough process considering the two parties are quite distant in terms or trade potential. The EU and UK have until June to substantially set out terms in preparation for a December 2020 deadline. This will lead to huge volatility as will involve a lot of back & forth and ups & downs.

The Prime Minister has continued to insist the UK will not be bound by the political declaration attached to the withdrawal agreement he has agreed with the EU

Euro

Many outbreaks of the coronavirus have been confirmed across the continent in Italy, Germany, Spain, Croatia and Austria; Italy being affected the most with 11 deaths confirmed. With the economic state of the EU Bloc, the added pressure of the coronavirus could push the Bloc into a recession. Germany compiling 40% of the EU have already showed signs of an upcoming recession with GDP, Consumer Confidence, Manufacturing and Exports all suffering losses over the last 10 months. Could the coronavirus cause an economic breakdown in the EU?

US Dollar

Between one and three interest rate cuts could occur over the next 6-10 months which will lead to a weaker USD. The US Stock market suffered its biggest loss in history, over $1trillion and has led to a lot of pressure on the USD to adjust monetary policy i.e. interest rates. However due to ongoing coronavirus issues, the USD is being seen as a safe haven currency and has proved to be the strongest performing currency.