Profit Insider Hub

Forex – Pound Set for Pain Ahead as Negative Rate Talk Heats Up

imageForex22 hours ago (May 21, 2020 02:17PM ET)

(C) Reuters.

By Yasin Ebrahim – The pound was flat against the dollar on Thursday but will likely remain under pressure as U.K. bonds continue to indicate the Bank of England could cut rates to below zero.

The United Kingdom 5-Year fell below zero for the first time on Thursday, as traders continue to price in the Bank of England cutting rates to below zero from 0.10%.

The prospect of negative rates has gathered momentum after the U.K. sold its first government bond with a negative yield at auction this week and BoE policymakers said negative rates cannot be ruled out.

BoE Governor Andrew Bailey said Wednesday that negative rates were being considered alongside other measures.

While a further increase in quantitative easing by the Bank of England at its June 18 meeting should be taken as a given, negative rates hinge on the speed of U.K. recovery, Jefferies (NYSE:JEF) said.

As well as negative rates, the pound’s decline has been exacerbated by ongoing worries about Brexit, with talks between the U.K and EU yielding little in the way of progress so far.

The UK’s chief negotiator David Frost said there had been very little progress on talks after both sides wrapped up the third round of Brexit talks last Friday.

The U.K has until June 30 to extend negotiations, but Prime Minister Boris Johnson has not expressed any willingness to seek an extension, raising the risk that the U.K may not have enough time to secure a trade deal beyond the transition period, which ends Dec. 31.

Forex – Pound Set for Pain Ahead as Negative Rate Talk Heats Up

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Post a Comment