The British pound may be one of the casualties when various countries finally decide to exit the coronavirus lockdown and it will all come down to how the British government handles the situation and any premature moves to end the lockdown early may have devastating consequences for the economy.
Analysts from Deutsche Bank have raised serious concerns about the UK’s exit from coronavirus restrictions which include worries over the economy, and the ability to conduct tests on the British population which is a cornerstone to stop the spread of the virus
"With market attention now turning away from the trajectory of epidemiological curves and towards exit strategies, three observations make us very worried about the UK. The UK's testing ability remains extremely poor, Public support for a hard lockdown in the UK is very high and the UK's economy is, on a relative basis, highly exposed to the coronavirus because consumption makes up 84% of the economy” says Oliver Harvey, Macro Strategist at Deutsche Bank.
The British pound faces another major hurdle namely Brexit negotiations and the country’s departure from the EU which has played 2nd fiddle to the coronavirus but sooner or later will have to be dealt with to save the UK crashing out of the European union with no deal which would be a double setback for the economy.
Talks on the divorce deal are expected to resume in the coming days but both sides seem to be far apart with their wish lists which will set the scene for difficult negotiations.
"There's hope on both sides of the channel that the Brexit negotiations postponed by the coronavirus can restart next week, but the contentious topic of fishing rights in UK waters could scupper those talks and raise the chance of Britain departing the EU at the end of 2020 with no deal," says Richard Pace, an options market analyst at Thomson Reuters.
"If that likelihood increases, it would clearly hurt the UK economy and GBP, already reeling from the economic impact of the coronavirus," he added.
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