- GBP/USD is taking a reign check from the highs as Brexit nerves kick-in.
- Barnier has warned that time is running out to strike a post-Brexit trade deal.
- The Chancellor said he would significantly expand the Treasury’s new JSS.
GBP/USD is currently trading at 1.3092 and is down some 0.36% at the time of writing on Brexit woes.
The price has travelled on Thursday between a range of 1.3070 and 1.3152, giving back positive Brexit sentiment gains as the mood sours towards the end of the week.
On Wednesday, the market was tuned into US stimulus talks and the US dollar was hampered by expectations of an agreement.
However, ‘tomorrow’ never came and the dollar gained as US equities sold off.
Meanwhile, the pound was trading on the bid throughout the dollar weakness and all the while markets were enthused by prospects that Brexit talks continued after the discretionary deadline of 15th October that Boris Johnson had self-imposed.
Sterling rose by as much as 1.7% versus the dollar on Wednesday after the European Union’s chief negotiator Michel Barnier said that a deal was within reach.
However, Barnier has warned that time is running out to strike a post-Brexit trade deal, as talks resumed after a week-long standoff.
Arriving in London, Michel Barnier said “every day counts,” ahead of face-to-face negotiations with his UK counterpart Lord David Frost.
Officials from both sides will hold “intensified” daily talks in the run-up to December’s deadline for a deal.
Downing Street has warned “significant gaps” remain in the most difficult areas.
Fourth major economic update
Meanwhile, covid related restrictions tighten their grip over large swatches of the UK economy and Chancellor Sunak announced his fourth package of support for UK businesses.
”Moving to appease worried business leaders and backbench northern Tory MPs as more parts of the country are put into higher restriction levels, the chancellor said he would make available billions of pounds in additional aid to protect jobs through a difficult winter,” the Guardian explained:
”In the fourth major economic update in as many months, the chancellor said he would significantly expand the Treasury’s new flagship job support scheme (JSS) to pay a larger share of workers’ wages than initially planned, alongside more money for the self-employed and grants for businesses in areas affected by local lockdowns.”
This comes a day after news that the ratio of government debt to GDP has risen to its highest level since 1960 when government finances were still repairing after WWII.’
”Surveys suggesting that a large proportion of UK businesses are not prepared for Brexit, the end to the Brexit transition period on December 31 could enhance the need for fiscal and potentially monetary policy support going forward,” analysts at Rabobank explained.
”While a trade deal between the EU and the UK would likely trigger a relief rally in the pound we expect a move to be half-hearted. The risk that a deal would lack the comprehensiveness that had once been hoped for, combined with the vulnerable nature of the UK economy and the weak popularity levels of the PM suggest that GBP will still face several hurdles next year,” the analysts at Rabobank added.
GBP/USD levels
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