The British Pound has deepest declines against the Euro since March owing to a combination of an ECB-inspired rally in the Euro exchange rate complex since the Brexit trade. The Sterling also fell against other currencies due to data showing. The UK economy is not in a good place right now. 

Pound weakens following revised growth forecasts 

The UK had fallen deeper into recession, meaning that they need to recover their lost ground as soon as possible. What does it mean for exchange rates? The sterling fell quite sharply against other currencies and it was due to the fact that the economy is not as healthy as it was.

New Bank of England governor 

The oldest central bank in the world, The bank of England has a new governor. Andrew Bailey is the current head of the U.K.’s financial industry regulators. Bailey already has 30 years of experience at the British central bank. He was always seen as Safe hands by analysts who should be able to guide the U.K. economy through the Brexit transition and beyond. 

UK economy 

Employers in Britain are planning more than twice as many redundancies that they did at the height of the last recession. About 180 000 job cuts were planned from January to March 2009, while 380 000 were planned from May to July this year. Completed cuts could reach 735 000 this autumn. 

Social distancing measures to prevent the spread of COVID-19 brought large parts of the UK economy to force workers to stay at home. 

As a result of that, many businesses have been forced to reduce their employees. On the 8th of September, a Freedom of information request by the BBC revealed that employers had listed more than 380 000 positions as at risk between May and July of 2020.

Stock market recovery 

The British pound appears particularly vulnerable to any coronavirus-inspired stock market sell-offs largely because the currency is so heavily dependent on the flow of international investor capital into the UK.

In the times where global investors are experiencing stressful times, their inflows tend to fade and support sterling drops.

The pound has not only fallen owing to investors’ movements, but there is an added issue of raising expectations for a Banks of England interest rate cut with the market’s expectations for a 0.25% interest rate cut at the bank.

The economic recovery continues 

The UK economy is trying to recover and the situation is getting better and better as the world is starting to reopen and the GDP has been increasing little by little. The slowdown in Europe and Brexit will soften the tone in the future month and everyone will see if the UK will be able to keep the pace as the year ends. 

The Bank of England is trying to stabilize everything. However, the last time they tried to affect the GBP exchange rate they joined The European Exchange Rate Mechanism in 1979. They then lost billions to George Soros. His convenient and courageous bet against the Bank of England in 1992 became Black Wednesday for the whole country. With costs of around £3.3 billion, Britain's central bank was incapable of protecting itself from an attack within the currency markets, and Mr. Soros made an estimated $1 billion in profits as a result. Because of it he becomes known as the best forex trader in the world and still retains that title. 

Brexit: What trade deals has the UK done so far?

As everyone already knows, the UK has signed an agreement in principle with Japan which will be marked as its first major trade deal since leaving the European Union. Uk has been free to strike its own deals for buying and selling goods and services around the world. 

What is a Free-trade deal?

A free trade agreement aims to encourage trade by making it cheaper. This often is achieved by reducing tariffs and changing the trading strategies across borders. Trade agreements are removing quotas and limits on the number of goods that can be traded. 

Trade can also be made simpler if countries are having similar rules. The closer the rules are, the more likely they are to have some disagreements with each other. 

Where does the UK trade?

Countries with EU trade agreements - 11%.

EU - 49%.

Rest of the world - 40%.

Japan, Vietnam, and Singapore are included in the “rest of the world” section as their EU trade deals have not come into force in 2018. 

Why have tariffs at all?

Free-trade agreements surely boost trade but too many cheap imports could threaten a country’s manufacturing and that could affect jobs. For that reason, a country might choose some quotas in order to protect local industries.

Where is the UK now 

The UK ceased to be a member of the EU from February 1, 2020. The country is no longer a part of the bloc’s institutions. This agreement will expire at the end of 2020. This includes the rules on Freedom of movement. The end of the transition period will bring significant changes regardless of whether agreement on the future relationship is reached. On January 1, 2021, the UK will no longer be part of the EU’s single market and customs union. 

EU and the UK’s new regulatory controls will be made after the end of the agreement. EU is stressed that this will bring longer delivery times while in early September the UK logistics criticized the state of UK preparations. EU citizens will no longer have the right to move to the Uk to work and settle and vice versa. 

The UK will introduce a new Immigration policy from January.