The Brexit pound is rising with expectations of an upcoming trade agreement



STERLING today rose with growing expectations that the United Kingdom and the European Union will announce a post-Brexit trade deal.

As agonizing talks persisted, with different deadlines having come and gone in recent weeks without agreement, the pound has been wildly churning in recent sessions.

The pound was trading about $1,3508 at 5 p.m., up from the close in London on Tuesday of $1,3339.

The pound remains far from the amount of about $1.50 it traded on June 23, 2016, prior to the results of the EU referendum.

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Sterling also gained ground against the euro, although at the close in London the single currency remained firmly above 90p. At 5 p.m., the euro traded at 90.29p, down almost 1p from Tuesday’s close of 91.24p.

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The government of Boris Johnson is seeking to reach a relatively small deal with the EU on free trade. Although analysts have acknowledged that when the transition period expires Dec. 31, this will prevent the uncertainty of a no-deal departure from the European Single Market, such an arrangement is generally seen as a challenging Brexit.

Projections published by the government of Theresa May in November 2018 show that Brexit would result in UK GDP being 4.9 percent and 6.7 percent lower, respectively, over 15 years, on the basis of an average free trade agreement with the EU, than if the country had remained a member of the powerful bloc, under the respective assumptions of no change in migration rules or zero net immigration of workers

The corresponding consequences of a no-deal exit on the UK Under the “no change in migration rules” and “no net immigration” scenarios, GDP at the 15-year horizon will be 7.7 percent and 9.3 percent.

The free trade agreement with the USA sought by the Conservative government will raise British GDP by a maximum of 0.16 percent over a 15-year horizon, according to the Johnson administration’s own forecasts.


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