A quieter day on the data front in the UK yesterday meant the attention turned back to Brexit trade talks and the future relationship between the UK and EU. The threat of a no deal Brexit is back on the table, with both parties toughening their stance ahead of next weeks trade talks. Boris Johnson, standing firm that the transition period will be extended past the current deadline and Macron insisting the EU will not be bullied into taking a ‘bad deal’. Rumours are that the PM is quite happy to walk away and trade on WTO standards.
Yesterday, ministers from the EU approved their mandate that will be followed by Michelle Barnier during the trade talks with the UK. The 46 page long document will be published and presented in parliament on Thursday, with the EU insisting the ‘EU standards should serve as a reference point for any future trade deal’. These talks are expected to last a few months and the Brexit tug of war to go back and forth throughout the summer.
Sterling has once again fallen below the 1.20 mark, a level it threatened to break last week.
The eurozone continues to feel the impact of the coronavirus, as investors keep moving out of equities and into safer assets, the risk of the disease has spread further and a hotel in Tenerife was put into lockdown after a travelling Italian doctor tested positive and Austria reported its first case. This is following the lockdowns in Italy, where the disease has been declared the worst crisis for many years. Yesterday saw the single currency lose ground against both major pairings as the impact of a stagnant economy and coronavirus are being felt.
Even after a positive German Business Climate reading was released by the Institute for Economic Research (Ifo) on Monday, it hasn’t managed to stop the slide.
As president Donald Trump is travelling around India with PM Modi, his rivals have been busy trying to get their campaigns under way in the US, with Bernie Sanders widening his lead to be the man to run against Trump for the Democratic party. Historically the currency markets become more volatile as the elections edge closer.
The markets seemed to recover slightly in the US after the initial hit following the spread of the coronavirus, with shares back in the green following Monday’s slide. However the Greenback was still sliding against sterling with the rate closing up on 1.30 at the time of writing.
To further dampen the mood around the US dollar, the CB Consumer Confidence came out below expected. This is usually the leading indicator for consumer spending, so a figure below expectation causes some alarm.
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