Brexit: No deal for pound and business as talks drag on | Economic news

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The pound has rallied as UK-EU negotiations on a Brexit free trade deal show signs of progress after Sunday’s deadline for a deal was extended.

The British pound rose sharply overnight in Asian markets and the rally continued as trade moved to London, pushing the currency up two cents to over $ 1.34 against the US dollar.

It also rose by over a cent against the euro to over € 1.10 as the currency rebounded from a pointed slide at the end of last week as fears grew over the prospect of a no-deal.

The rally, which took place amid signals to Brussels that progress was being made in negotiations, then faded with the pound which fell back to around $ 1.33 against the dollar and fell below € 1.10 against the euro on Monday afternoon.

In stock markets, UK-focused bank stocks rallied after a Brexit-inspired selloff on Friday, with Natwest, Lloyds and Barclays each adding nearly 5%.

The larger FTSE 100, dominated by global currency holders whose stocks tend to react negatively to a strengthening pound, ended the day down 0.2%.

However, the more domestically focused FTSE 250 was nearly 2% higher late in the morning, though it gave up a large chunk of the gains to finish 0.7%.

Market analysts have warned that the pound’s rally is temporary, with investors watching developments closely.

“The pound is obviously relieved that trade talks are continuing between the EU and the UK,” said Jane Foley, head of foreign exchange strategy at Rabobank.

“However, no tangible process was confirmed over the weekend and the market should therefore remain on
hot coals in the coming week.

“Without confirmation that progress has been made, the pound’s gains should be capped. ”

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Businesses ‘frustrated’ by lack of clarity on Brexit

London and Brussels agreed on Sunday to “go the extra mile” in the coming days to try to reach a deal to limit disruption after the Brexit transition period ends on December 31.

A no-deal Brexit would lead to trade between the UK and the EU under World Trade Organization rules which would see tariffs and quotas imposed on both sides at a time when economies are already in shock COVID-19[feminine[feminine crisis.

The news that a deal’s deadline was exceeded has been both welcomed and criticized by business groups, given the continued lack of clarity on the rules ahead for the end of the month.

UK Chambers of Commerce Managing Director Dr Adam Marshall said: ‘It is a very frustrating time for businesses as they look forward to terms of trade decisions with the EU on January 1 .

“If a few more hours or days makes the difference, go ahead – and get a deal that brings clarity and certainty to business and commerce on both sides.

“Businesses will need time and support to adjust to a new year like no other – regardless of the end result. ”

No industry has been more desperate to avoid tariffs than the UK auto industry.

He forecasts a ruinous blow of £ 55bn over five years in the event of a no-deal scenario.

Mike Hawes, CEO of industry body SMMT, said: “We welcome the commitment of both sides to continue to discuss and find a way out of the political impasse – now we need negotiators to finish the job and come to the deal we all desperately need. , without further delay.

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“Where there is a will, there is a way” – Irish Prime Minister

“No deal would be nothing short of catastrophic for the auto industry, its workers and their families, and be a staggering failure of political leadership. Quite simply, it must be excluded. ”

Another part of the UK economy that is clamoring for a deal is retail – with physical stores, like car sales, enduring horrendous bumps from the coronavirus disruption in 2020.

It acted to reassure shoppers that there would be no need to repeat the pandemic-style panic purchase of essentials such as toilet rolls before the Jan. 1 deadline, supermarket chains having prepared for a no-deal situation.

British Retail Consortium Managing Director Helen Dickinson said: “The 11th hour has passed and each passing moment of uncertainty makes it harder for businesses to effectively prepare for January 1st.

‘Without a deal, the British public will face over £ 3bn in food tariffs and retailers will have no choice but to pass some of these extra costs on to their customers who would see higher prices filtering out. in 2021. ”

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