FX markets have begun their first proper trading day secure in the knowledge that the United Kingdom will have a trade deal above WTO standards with respect to the EU-27 come 1st January. So far there hasn’t been a huge sigh of relief evident within the Pound but it is evident that, in combination with Trump signing a fiscal stimulus bill to prevent US government lockdown, markets are embracing less defensive conditions this morning. The Pound did rally upon confirmation of a deal on Thursday afternoon. However, upward momentum was capped and prices ultimately rejected it seems at 1.36/1.115 versus the Dollar and Euro respectively.
The lacklustre move in the Pound comes down to two things. Firstly, the prospect of a deal was largely priced in with the real risks to GBP pricing lurking towards the downside should a no-deal have materialised. Despite GBP being off of its Thursday highs, in comparison with where we might have been trading this morning should a no-deal have become apparent last week, GBP is solid. The second reason is that the deal itself is a hard form of Brexit and provides for tariff free (and limits thin non-tariff barriers to) trade only. The deal does not cover services, including financial services. The deal also makes no attempt to preserve elements of the customs Union and single market that are supportive of economic growth.
The market this morning is also taking note of astronomically high rates of coronavirus infection in the UK and reports that hospital admissions are higher than those in the first wave. With much of the UK already in the highest tier of infection, the expectation of a bumpy road ahead with respect to the health crisis and its knock on implications upon the economy have GBP on the back foot. The deal should still, however, provide a positive backdrop for Sterling for some time to come. The deal whilst not being what all may have hoped for does provide an immensely important legal backdrop and starting point upon which to shape UK trade with respect to the Union whilst respecting the result of the 2016 vote.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – US Dollar
Humphrey Percy
Fri 24 Apr 2026
US Dollar The Maurits C. Boas Professor at Harvard University who is better known as the former IMF economist Ken Rogoff has broken cover about the USD: he is predicting that the Chinese Yuan will be a Reserve Currency within 5 years and the USD will decline between 15-20%, which would take EUR/USD to 1.40 predicated […]
Daily Brief – Brent Oil
Humphrey Percy
Fri 1 May 2026
Brent Oil With oil breaking USD 126 yesterday morning on the back of failed arrangements for peace talks and the likelihood of a resumption of US-Iranian hostilities, the news that the UAE are withdrawing from both OPEC and OPEC+ citing the protection of their own interests might have been expected in more normal times to […]
Daily Brief – German Gold
Humphrey Percy
Wed 29 Apr 2026
German Gold With 3350 tonnes in the vaults and the 2nd largest gold reserve in the world after the USA, Germany has EUR 440 billion worth of moolah tied up in that asset class. Some people both inside and outside Germany are saying it might be time to spend some of it. The Bundesbank is naturally […]
