Abstract: On Friday, the British pound fell more than 100 points against the US dollar, refreshing its position since March 26 to 1.2102, which was mainly due to the impasse of the Brexit trade negotiations between the United Kingdom and the European Union, and the impact of the epidemic on the British economy.
On Friday, May 16 (May 15), the pound fell more than 100 points against the US dollar, refreshing its position since March 26 to 1.2102. This was mainly due to the deadlock in the Brexit trade negotiations between the United Kingdom and the European Union, and the outbreak of the British economy. The impact of shock. Some analysts said that because the UK is currently in an independent position, the market outlook will face more risks and the pound will continue to be under pressure.
UK and EU Brexit trade negotiations stalled, both sides do not compromise
The latest negotiations between the UK and the EU seem to have reached a deadlock again. David Frost, the chief negotiator for Brexit, said that "progress has been very limited" in reaching an agreement. The EU's chief Brexit negotiator Barnier said that there are still great differences between the two sides' positions.
British Prime Minister Boris Johnson threatened that if the negotiations did not make enough progress, he would withdraw from this week's negotiations. This increases the risk that the United Kingdom will end the transition period on December 31 without signing a free trade agreement, which will put further pressure on the British economy, which has faced the worst recession in three hundred years.
The British government reiterated its refusal to extend the Brexit transition period beyond December, saying that the EU ’s trade agreement is not in a hurry to make compromises, which caused the pound to fall.
"The Brexit crisis has risen again," said Ned Rumpeltin, head of European foreign exchange strategy at TD Bank in Toronto. "Since dormancy at the end of last year, it seems that Brexit as a negative factor for the British pound has not been completely ended. The exchange rate of the G10 currency against the US dollar remains high Driven by risk, but the return of these concerns may become a significant difference in the pound exchange rate. "
"The outlook for the pound is still bearish because the latest round of Brexit negotiations this week did not show any signs of progress in key areas," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
It is also because of the unsuccessful trade negotiations between the United Kingdom and the European Union that the British pound has once again become an outcast of the currency world. The British pound has fallen by 0.5% against the US dollar and the euro on Friday, the risk of Brexit and the economic slowdown caused by the new crown virus. Putting pounds under pressure.
The epidemic hit the British economy, fearing the worst recession in 300 years
As of Friday (May 15), the pound has fallen for the fifth consecutive trading day and is the worst performing G10 currency so far this month. It has fallen more than 2.2% against the dollar since the end of April. The pound fell 0.5% against the dollar to 1.2165 dollars on Friday, not far from the five-week low of the previous day.
The death toll from the New Corona virus in the UK has exceeded 40,000, the highest in Europe to date.
The British economy shrank by a record 5.8% in March compared to February, and it is expected that it will be hit harder in the coming months. The Bank of England said last week that the United Kingdom will hit its worst economic recession in more than 300 years in 2020. It is estimated that the economy may shrink by 14%, and will rebound by 15% in 2021.
Bank of England Governor Bailey said the bank did not consider reducing interest rates below zero, although he refused to rule out negative interest rates altogether.
It is widely expected that the Bank of England will implement more quantitative easing policies in June, which will hurt the pound.
MUFG strategist Lee Hardman expects the pound to fall to $ 1.20 or even lower in the short term. The general forecast of the Bloomberg Exchange Rate Survey is that the pound-to-dollar exchange rate will rise by nearly 4% from current levels to 1.26 at the end of the year, but this is much lower than the forecast of 1.33 dollars two months ago.
MUFG ’s Hardman said investors ’views on the UK ’s prospects are more negative than in other regions, thereby encouraging increased risk of speculative selling. "In trade negotiations with the EU, the UK is in a unique position and faces considerable risks."