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Will a No-Deal Brexit trigger negative interest rates? - Euro currency news daily

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GBP - British Pound

The Pound declined yesterday as the Bank of England held rates at 0.1% and left QE unchanged but the possibility of negative rates moved a step closer. We did, however, see a recovery late afternoon after comments from EU Commission President Ursula Von Der Leyen who is "convinced" an EU-UK trade deal is still possible, with Michel Barnier echoing these sentiments in comments yesterday.

The Bank of England will hope for an agreement to be made, if not, they may have no other option but to take action and impose negative rates. With less than 4 weeks before Boris Johnson's imposed deadline of the 15th October to reach a free trade deal with the EU or the UK will "move on", we can expect to see more volatility, however, should a deal be reached by then, we could see sterling surge.

Key Movers

In the US, employment data released yesterday showed that initial jobless claims fell by less than expected. The Federal Reserve has pledged to keep rates near zero until at least the end of 2023 until employment and inflation reach its targets. Some strategists have said that any dollar strength was likely short term.

The central bank has also called for more fiscal help from Congress, which still looks unlikely. Thursday saw the greenback decline against most currencies, with losses extending into today's morning trade.

Expected Ranges

GBP/USD: 1.2960 - 1.3020 up

GBP/EUR: 1.0940 - 1.0980 up

GBP/AUD: 1.7730 - 1.7840 up

EUR/USD: 1.1840 - 1.1880 up


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Eurozone Economic Calendar

Tuesday 22 September


14:00 Consumer Confidence (Sep) (Preliminary release)

Wednesday 23 September


07:00 Non-Monetary Policy ECB Meeting
08:00 Markit Manufacturing PMI (Sep) (Preliminary release)
08:00 Markit Services PMI (Sep) (Preliminary release)
08:00 Markit PMI Composite (Sep) (Preliminary release)

Thursday 24 September


08:00 Economic Bulletin

Friday 25 September


08:00 Private Loans (YoY) (Aug)
08:00 M3 Money Supply (3m) (Aug)
08:00 M3 Money Supply (YoY)(Aug)
19:30 CFTC EUR NC Net Positions