Investors say the UK-EU trade agreement leaves Britain with many economic uncertainties. A deterred U.S. COVID-19 emergency bill in Congress also keeps investors on edge.
The British pound hovered below a two-and-a-half-year high on Friday after the United Kingdom and the European Union hit a narrowly focused Brexit trade deal, while overall sentiment in foreign exchange markets was dampened by a halted economic coronavirus From usa. package.
The United Kingdom concluded the Brexit trade agreement with the EU just seven days before leaving the world’s largest trading bloc.
Sterling last stood at $ 1.3549, after failing to rise above the two-and-a-half-year high of $ 1.3625 it hit last week. Against the euro, the pound fetched 89.80 British pence per pound. Euro after a three-week scaling of 89.54 on Thursday.
The British currency also hit a three-and-a-half-month high of 141.06 yen before rising to 140.22 against the Japanese currency, although trading was slow as many financial markets were closed for Christmas.
Among the few major stock markets trading on Christmas Day, Japan’s Nikkei 225 index was mostly stable, falling just 0.02 percent to 26,662.34 in morning trading. The broader Topix rose 0.08 percent to 1,775.74.
While the Brexit agreement will preserve Britain’s zero-tariff and zero-quota access to the bloc’s internal market and avoid a financially damaging “no-deal” exit, it does not cover the country’s much larger and influential financial sector. And Brussels has not yet made a decision on whether Britain should provide access to the bloc’s financial markets.
‘Just the beginning’
“It is important to recognize that this is only the beginning of a new trading relationship that can be built on,” wrote Gavin Friend, a senior market strategist at National Australia Bank in London.
“We also need to be prepared for both sides to turn the agreement in their respective ways designed for domestic consumption. The national press will always talk about ‘winner’ and the other side respectively. “
While trade was a relief for market participants, the naked nature of the pact leaves Britain much more detached from the EU, analysts say. It suggests that British assets could remain below the value of their global peers for some time yet after their leap after the 2016 referendum that resulted in the decision to leave the bloc.
“Now that the agreement is complete, over time we will begin to see the financial consequences of leaving the EU. And I think that’s clearly negative for the UK economy, ”said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.
“I would think the pound will slide after all the positive things about a deal have already been priced,” he added.
Also, the UK economy in the short term is hindering the growing incidence of COVID-19 cases in England, where one in 85 people became infected last week as a new, more contagious virus strain breeds in the south-east of the country.
Dollars are stuck
The U.S. dollar was cut in a tight range as a standoff of a $ 2.3 trillion coronavirus in Washington continued, raising the prospect of a partial shutdown by the government.
Republicans and Democrats in the U.S. House of Representatives have blocked attempts to change coronavirus aid and government spending package, leaving its status in doubt after President Donald Trump demanded sweeping changes to the law.
After several months of political strife, the US Congress on Monday overwhelmingly approved a 892 billion. $ Coronavirus emergency relief bill, which includes a one-time payment of $ 600 to individuals to help them cope with a pandemic-backed US economy.
The dollar traded at 103.55 yen, down 0.2 percent on the day, while the euro traded almost flat at $ 1.2188.
The dollar index – a measure of the greenback value against a basket of key global currencies – stood at 90,285, from its two-and-a-half-year low of 89,723, which was touched last week.
Offshore Chinese yuan was slightly changed at 6.5185 per dollar.