Hard Brexit Avoided: Last Minute Free Trade Agreement – Commerzbank Column

Great Britain and the EU agreed on an agreement at Christmas that will regulate relations after the transition period from leaving the EU (January 31, 2020) until the end of 2020. Essentially, it is about a free trade agreement, i.e. no tariffs will be levied, but other obstacles will make trade more difficult in the future, which is primarily associated with extensive bureaucracy. There is also no longer any right to settle down and work in the other economic area. Great Britain buys duty-free access with the assurance that it will not give domestic companies an unfair competitive advantage by lowering standards for workers’ rights, the environment or through subsidies. It is better than no agreement, but worse than the conditions in the transition period. It leaves out services that are much more important to Britain than the exchange of goods. For example, British financial companies are losing automatic access to the EU market. The appreciation of the British pound vs. The euro and US dollar, which started before the turn of the year, were very restrained, as a hard Brexit had not yet been fully priced in. At the beginning of the week, the British pound weakened again. The reason for this is i.a. a nationwide lockdown that was imposed through mid-February and will weaken the economy. In addition, there is more and more speculation about rate cuts. With the agreement, the Bank of England (BoE) can concentrate entirely on the domestic economy and, in contrast to the ECB, it still has room to lower interest rates. The interest rate speculations are likely to dampen or even destroy any further pound recovery

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