GBP/USD has been caught up in the crossfire of risk-on and off markets due to the missile attacks and crises in the Persian Gulf. Today, however, President Donald Trump defused the tensions in an address that has enabled markets to get back to basics.
This
means that global trade deals will now be front and center and fully back on
the agenda for politicians. Firstly, we will see the US and china hopefully
sign a phase one trade deal. Assuming that goes ahead without delay, scheduled
for the 15th of this month, market attention will be on Brexit gain. Assuming
the European Parliament also gives the green light, the UK will formally leave
the EU on 31 January with a withdrawal deal. Following its departure, the UK
will enter a transition period until 31 December 2020.
Time is ticking
This
is where the risks lie for GBP now. During this period, the UK’s trading
relationship with the EU will remain the same, but e will have plenty of news
and headlines regarding the negotiation of a free trade deal and many aspects
of the UK’s future relationship with the EU.
There
are skeptics who say that there is simply not enough time for a deal to be made
before 2021, but if a trade deal is ready in time, the UK’s new relationship
with the EU can begin immediately after the transition. If not, then, at this
stage, a hard Brexit will be the outcome which GBP trader fear the most –
indeed, Mr. Johnson has also ruled out any form of an extension to the
transition period, meaning the clock is already ticking.
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