Beyond Currency

Any future relationship between the UK and the EU is now in serious jeopardy with Brussels threatening legal action if the Bill is passed, while Boris Johnson refuses to back down. This goes above and beyond no deal as an outcome of the negotiations. As a tactic to ensure that the EU backs down over the two outstanding disagreements over the future relationship, it is brinkmanship at its most extreme.

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Yesterday the UK released the terms of its internal market bill.

Hidden in plain sight in the document was the potential bombshell that the UK Trade Minister will have the authority to effectively change the terms of the agreement that formed part of the Withdrawal Agreement that was signed last year and is governed by international law."

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

The pound has taken a battering over the past few trading sessions as the market comes to terms with the fact that the recovery in the UK is going to take longer and be more costly than it previously imagined while the Government has to also deal with Brexit trade negotiations.

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The game of bluster and counter-bluster that has gone on ever since the UK voted to leave the EU has burst back to life as the clock counts down on the negotiation period.

Each side blames the other, and while Prime Minister Boris Johnson continues to extol the virtues of a no deal departure, such an outcome would be fraught with dangers.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Brexit trade talks continue but there is little, or no progress being made on the two remaining sticking points. First, the UK will not bow to the EU on competition rules.

The second point of contention is around fishing rights. Brussels concedes that the UK controls its own coastal waters, but the EU must have access to fish within those waters."

Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The UK is suddenly seen as a leader in the fight against a second wave of infections from Covid-19. If not a global leader, certainly a leader as far as Europe is concerned.

The fear is that there is going to be a second wave of infections across Europe that will decimate their ability to fight off its worst effects on their economy, while the UK considers its own plans but limits travel to and from the mainland.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Although the recovery to a level last seen at the end of last year won’t be seen until the end of next year, Bailey is confident that the recovery will be steady and gradual, despite its length.

There is a very real caveat, and that is the extent to which the economy may be affected by a second spike of the Coronavirus epidemic. New infections across the larger EU economies are currently running at a rate of about double what is being seen in the UK. It is assumed that the UK follows mainland Europe by between two and three weeks, so it is obvious that the next month will be critical.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"When Bank of England Chief Economist Andy Haldane made his prediction of a V-Shaped recovery it seemed from the data that has been released since that he was definitely on to something. The economy seemed to be recovering nicely and the Chancellor’s innovative schemes were being deemed a success.

What a difference a week makes. Despite the pound reacting positively to a weakening dollar and data which shows that there is a recovery, of sorts, happening, the spectre of a second spike is taking shape.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"Monetary policy is in danger of becoming irrelevant. That is a theory that could shake the walls of Threadneedle Street to their foundations. Some would say that the official rate of interest has always been irrelevant, but for now it certainly is.

For the man in the street, it is far more important to be able to go out, possibly take his family out and eat at a price they can afford. The Eat Out to Help Out scheme looks like it is a success. Of course, we will need to await official data but anecdotally it looks that way.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.

"The Bank of England's Chief Economist Andy Haldane is paid to see into the future and predict just how the economy is going to perform. It would appear that he has earned every penny of his salary over the past month as he predicted a significant rise in manufacturing output and that is what the economy delivered.

Factory output grew to 53.3 in July, in line with the flash estimate, confirmed Haldane’s view that the economy is going to experience a V-shaped recovery. Of course, his prediction was made prior to the current fears over a second wave of Covid-19.

That could curtail what has been a run of improving data despite headwinds over China and Brexit threatening to push the recovery off course.

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Beyond Currency Market Commentary:

Aims to provide deep insights into the political and economic events worldwide that can cause currencies to change and how this can affect your FX Exposure.