Fitch: Brexit negotiations remain hugely challenging

Eren Sengezer FXStreet

"The agreement between the UK and the EU to move to the next phase of Brexit negotiations is a step towards a potential agreement on Brexit and trade, but the process remains lengthy and challenging, and the deal leaves many key uncertainties unresolved," Fitch Ratings argued in a recent report.

Key quotes

UK and EU negotiators on Friday set out joint commitments that would form the basis of a withdrawal agreement, ahead of a European Council meeting on 14-15 December.

Failure to move the negotiations on would have increased the risk of the UK failing to secure a future trade relationship or a transition period, and experiencing a severe economic shock when it leaves the EU in March 2019.

Fitch's UK forecasts in our most recent Global Economic Outlook, which see GDP growth rising to 1.7% in 2019 after slowing to 1.4% next year, assume a transition period that maintains the current relationship, and today's announcement supports this assumption.

Nevertheless, Brexit negotiations remain hugely challenging. The time available to secure a trade agreement has shrunk.

Overall, today's announcement does not alter the view we expressed when we affirmed the UK's 'AA' sovereign rating in October.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

GBP/USD strengthens to near 1.3400 as UK political risk fades

The GBP/USD pair gathers strength near 1.3395 during the Asian trading hours on Thursday, bolstered by fading domestic political uncertainty. However, hawkish minutes from the Federal Reserve and renewed tensions between the US and Iran might support the US Dollar and cap the upside for the major pair.

EUR/USD sticks to positive bias above 1.1400 vs USD; Mideast tensions cap gains

The EUR/USD pair attracts some buyers for the second straight day, though it lacks follow-through and remains confined within the previous day's range during the Asian session on Thursday. Spot prices currently trade around the 1.1420 area, up less than 0.10% for the day, and remain at the mercy of the US Dollar price dynamics.

Gold sees more pain as Iran tensions revive inflation fears

Gold price reflects signs of softness on Thursday, trading 0.5% lower at around $4,056 during the Asian trading session. The precious metal is under pressure as Middle East hostilities have revived fears of high global inflation, a scenario that discourages major central banks from easing monetary conditions. This framework bodes well for interest-bearing assets, but diminishes the appeal of non-yielding assets, such as Gold.

Bitcoin eyes $60,000 – Jupiter and Pi Network lead losses

Bitcoin is extending its losses on Thursday for the third consecutive day amid renewed tensions between the US and Iran. Risk-off market sentiment intensifies, with Jupiter and Pi Network emerging as the biggest losers over the last 24 hours. CoinMarketCap's Crypto Fear and Greed Index is at 26 on Thursday, down from 29 on Monday, indicating a clear increase in risk-off sentiment.

2.50%: Why the Kiwi's first hike in three years is a wager on a number nobody can see

The Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by 25 basis points to 2.50% at 02:00 GMT on Wednesday, its first hike in three years and the moment the bank that cut deeper than any G10 peer last cycle turned to face the other way.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.