Post Brexit trade delays to last until summer
Pound Sterling (GBP) is falling against its key currency competitors as it’s revealed that post-Brexit trade delays could last until the summer.
Against the US dollar (USD), the British pound (GBP) is 0.32% lower at USD 1.38, while the British pound to euro (GBP/EUR) exchange rate is 0.35% lower at EUR 1.16.
Conservative MP, Andrew Bridgen, recently stated that the UK are in midst of a trade war with the EU, with the bloc yet to ratify the post-Brexit trade deal despite agreeing to terms last December. The lack of certainty has encouraged fears of a no-deal Brexit to resurface.
A report to be published on Monday outlines the concerns for the future of the Brexit trade deal agreement and includes comments from former chancellor Lord Lamont and former national security adviser Lord Ricketts. The report states “the European Union committee warned in December 2017 that it was difficult to envisage a worse outcome for the UK than a ‘no-deal’ Brexit. We are therefore concerned that recent developments have so undermined trust that the possibility of ‘no deal’ – in other words, a failure to ratify the trade and cooperation agreement (TCA) – has now resurfaced.”
Foreign exchange (FX) markets had reacted positively to Boris Johnson’s and Ursula von der Leyen’s agreement on Christmas Eve, with many perceiving the forthcoming “next steps” to be a promising sign of significant progress between the UK and the EU.
However, amid a lack of official guidance with the Brexit trade deal yet to be sanctioned by the EU, the British pound (GBP) remains volatile approaching the end of Q1. With data revealing a 30% drop in German exports to the UK in January, cross border trading has taken a dive so far this year.
Whilst Brexit is no longer a primary driver for the British pound (GBP), post-Brexit uncertainties are likely to cause friction between the British pound to euro (GBP/EUR) exchange rate over the coming months.
These fresh post-Brexit tensions follow the EU initiating legal proceedings against the UK for undermining international law with the Internal Market Bill. Tensions between the European Union and the United Kingdom flared over September as the UK government went ahead with plans to pass new legislation that Von der Leyen said: “breaches the obligation of good faith laid down in the Withdrawal Agreement.”
The news saw pound Sterling (GBP) react positively to the news, rallying against the majority of its G10 rivals, including the US dollar (USD) and the euro (EUR) in currency markets as it’s forecast that the British pound (GBP) could soon rebound against its major rivals.
UK/EU trade impacted by lack of customs agents
As confusion at UK ports resulted in trucks crossing the channel with empty containers, recent reports have also indicated that a lack of customs agents has been a significant reason for dwindling cross border trading between the UK and EU.
It was anticipated that 30,000 customs agents would be recruited post-Brexit to minimise delays in UK/EU trade and handle the additional regulations, though this failed to be implemented.
To add to the tension further, the EU has also threatened to hold back on exporting doses of the Oxford-AstraZeneca vaccine to the UK, which will be debated by all member states this Thursday.
The decision could potentially delay the UK’s vaccination programme by two months, as Boris Johnson is set to speak with various EU leaders before the meeting. There is hope that Johnson’s intervention will help to revitalise negotiations and dissipate some of the antagonism of previous interactions.
The Eurozone is facing tremendous pressure as a third wave of coronavirus infections is sweeping across the bloc. If the EU was to keep its full supply of AstraZeneca vaccines would help to speed up vaccinations within the Eurozone by one week.
Coronavirus infection rates have risen dramatically across a number of EU countries including Italy, Poland and France. The countries most affected have all imposed tighter restrictions over the weekend in a bid to reduce the spread of infection.
British pound to Japanese yen suffers
The British pound to Japanese yen (GBP/JPY) exchange rate has slipped at the start of the new trading week to JPY 150.62, having reached up to JPY 151.9870 during the middle of last week.
At the time of writing, the British pound to Japanese yen (GBP/JPY) exchange rate is trading at 0.26% lower, despite an overall positive outlook for the future of the UK economy.
Although the US dollar (USD) is fulfilling its role as a safe-haven currency, the Japanese yen (JPY) tends to outperform during heightened periods of uncertainty as it remains the refuge currency par excellence.
Regarding GBP/JPY, it remains unknown whether the currency pair will be able to capitalise on the intraday bounce given the uncertainty surrounding Brexit.