Home Daily Commentaries UK PM works hard to reduce Brexit red tape

UK PM works hard to reduce Brexit red tape

Daily Currency Update

UK Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen released the Windsor framework last week. According to the Financial Times, it will slash the Brexit red tape for trade from Britain into the UK region. Rishi Sunak agreed, “…remove any sense of a border in the Irish Sea." After ongoing negotiations, the deal struck by Sunak on the Northern Ireland protocol represents a breakthrough moment in UK-EU relations. The new arrangement has the hallmarks of the most successful negotiations which provide a mutually beneficial outcome to the UK and Europe.

All eyes are on UK GDP this week, which is set for a first-quarter decline, despite a likely January rebound according to ING. UK economic output fell sharply back in December but the likely rebound in January may be unlikely to combat the previous sharp decline. ING currently forecasts a decline of 0.2% in the UK GDP.

Key Movers

The US dollar fell against all G10 currencies last week, erasing more than half the profits from two weeks ago. The Euro rose 0.82% versus the Greenback, then the British Pound which soared 0.77% against the US currency. The Chinese -reopening story took another positive turn with China PMIs released last week, and the official manufacturing PMI rose to 52.6 in Feb vs. 50.1 prior. This is its highest reading in over a decade. A faster exit from zero-COVID in China and a rate hike cycle for the Fed coming to maturity gives signs that the US Dollar could remain on the back foot as risk appetite returns to the market.

There is longer-term optimism in the market for the Euro with ECB’s Muller stating that rate hikes from the ECB are having an effect, but inflation is still too high – Muller added, “…expectations of rapid ECB rate cuts are wishful thinking,”

Expected Ranges

  • GBP/USD: 1.1970 - 1.2065 ▲
  • GBP/EUR: 1.1260 - 1.1330 ▼
  • GBP/AUD: 1.7710 - 1.7945 ▲
  • EUR/USD: 1.0580 - 1.0665 ▲