GBP / USD remains at two-week low, without reaction as fishing tensions between UK and France show signs of easing – .

GBP / USD remains at two-week low, without reaction as fishing tensions between UK and France show signs of easing – .

  • The GBP was the worst performing G10 currency on Monday, with GBP / USD remaining moderate around 1.3650-1.3700.
  • News that France has extended the deadline for an agreement with the UK on fishing rights has not moved the markets.
  • While cross-channel tensions are a key issue this week, whether or not the BoE is raising rates is another.

The pound sterling was the worst performing G10 currency on Monday, down about 0.2% against the US dollar, but down about 0.6% against the euro. This means that the GBP / USD pair traded between 1.3650 and 1.3700 for most of the day, its low for around two and a half weeks. Tensions with France over the fishery have intensified in recent days and are largely attributed to Monday’s underperformance.

But the latest news on this front has been positive; According to Reuters, on Monday evening on the sidelines of the COP26 summit, French President Emmanuel Macron announced that his government would postpone by one day the deadline for a resolution of the ongoing fishing dispute with the United Kingdom. Previously, the French government had said it would implement tighter controls on trucks entering the EU from Britain and ban British trawlers from docking in French ports from 11 p.m. GMT on Monday. France says the UK has failed to keep its commitments in the Brexit deal in terms of fair access to French fishing vessels in UK waters. Talks between the UK and France continued on Monday and Macron said those talks should continue. “We’ll see where we are tomorrow at the end of the day,” Macron said.

UK Prime Minister Boris Johnson’s rhetoric / tone to the press about escalating the fishing access dispute with France was fairly measured, with the PM simply pledging that the UK would take action. proportional measures. The British Prime Minister and the French President will have spent a lot of time in each other’s presence on Monday and in recent days, given both their presence at the G20 (which is now over) and the start of COP26 (which ends in two weeks) and it seems to have finally resulted in some easing of tensions. But a day is not long for the two sides to come to an agreement, so the risk of escalating into an actual trade / legal battle remains high and is a key story for GBP traders to watch out for this week. If France is to follow through on its threats against the UK, this arguably poses a (albeit low) downside risk to the UK economy by further exacerbating supply chain disruptions / bottlenecks that are currently hampering growth.

Another key topic to watch this week is Thursday’s Bank of England meeting; economists and money markets are divided on whether or not the bank will proceed with a 15bp rate hike. There are four hawkish members of the Monetary Policy Committee (the committee of nine that vote on interest rates, sometimes called the MPC) who are likely in favor of a hike, including Governor Andrew Bailey, Chief Economist Huw Pill , Deputy Governor Dave Ramsden and the external MPC. member Michael Saunders. These members expressed concerns about the unanchoring of inflation expectations amid the recent surge in the CPI to multi-year highs and amid expectations this surge will worsen next year. Meanwhile, there are three members of the MPC, including external members Catherine Mann, Jonathon Haskell and Silvana Tenreyro who prefer to wait until at least December to observe the development of the labor market following the end of the regime. government holiday in September (much of the October labor market data will not be released until December). Deputy Governors Jon Cunliffe and Ben Broadbent have yet to say which side they belong to, and their votes will eventually switch whether there is a hike or not.


Please enter your comment!
Please enter your name here