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Pound rangebound as EU suggests full trade deal with the UK ‘impossible’ in current timeframe

currency-newsPound rangebound as EU suggests full trade deal with the UK ‘impossible’ in current timeframe
The pound was left directionless on Wednesday as European Commission chief Ursula von der Leyen warned it will not be possible for the UK and EU to negotiate a comprehensive trade deal by the end of 2020.

Sterling remains muted this morning, with GBP/EUR flat at €1.1790, GBP/USD rangebound at $1.3095, and GBP/CAD stable at C$1.7088. GBP/AUD and GBP/NZD are holding steady at AU$1.9068 and NZ$1.9740 respectively.

In the spotlight today will be a speech by Bank of England (BoE) Governor Mark Carney. Will a dovish outlook from Carney exert some pressure on GBP exchange rates today?

What’s been happening?

The pound struggled to find momentum mid-week in light of renewed Brexit uncertainty.

The main drag on Sterling sentiment yesterday appeared to be a warning by European Commission President, Ursula von der Leyen, who questioned Boris Johnson’s timeframe for securing a trade deal with the EU.

Ahead of a meeting with the PM, von der Leyen suggested it would be ‘impossible’ for the UK to reach a comprehensive deal with the EU by the end of 2020, Johnson’s self-imposed deadline for agreeing a trade deal.

At the same time, the euro sank on Wednesday in response to some underwhelming German industrial data.

Germany reported factory orders unexpectedly contracted 1.3% in November, suggesting that the country’s manufacturing sector is still yet to bottom out and dampening hopes that Germany’s economy returned to growth at the end of 2019.

Meanwhile, the US dollar was able to find some support yesterday as it was bolstered by easing tensions between the US and Iran as well as a stronger-than-expected ADP employment report.

What’s coming up?

Looking ahead, the focus for markets today will be a speech by Mark Carney later this afternoon.

GBP investors will be hoping that the BoE Governor may drop some more hints about the bank’s policy plans, particularly now that the UK looks set to ratify a withdrawal deal with the EU, with any hints towards a rate cut likely to dent the pound.

Meanwhile, the euro appears to be on stronger footing this morning following the publication of Germany’s industrial production data, which (n contrast to yesterday’s factory order figures) showed an improvement in November.

Finally, for USD investors, the focus will turn to Friday’s non-farm payroll report, with Wednesday’s ADP figures buoying expectations for another solid rise in payroll numbers.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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