07/09/2020

EU trade deal deadline set for October


GBP

Sterling fell against the dollar on Friday as a combination of dollar strengthen and Brexit risk weighed on the pound. Brexit uncertainty is likely to hurt the pound in the coming weeks as Boris Johnson has now set a deadline for a trade deal to be concluded. The Prime Minister is expected to say that if a trade deal cannot be concluded by the 15th October then both parties should ‘accept that and move on’.

To boost optimism, PM Johnson repeated that leaving without a trade deal will still be a ‘good outcome’ and has echoed the thoughts of David Frost who previously commented ‘the UK is not scared’ from walking away without a deal.

Fears of a no deal are rising, as negotiations have been hindered by the UK demanding full autonomy over its state aid plans and fisheries. The pound is likely to remain volatile in the coming weeks with the next set of negotiations set to take place on Tuesday.

Lastly, Bank of England policy maker Michael Saunders expects unemployment to increase significantly in the coming quarters, therefore further stimulus could be required.

Key announcements

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