It’s been a tough start to 2020 for Sterling, with the UK currency shedding 0.6% as traders return to London today and kick off a new calendar year.
After a brief respite over the Christmas period, Brexit is now once again on the minds of traders. Although last month’s historic Conservative win marked an important first step in the Brexit process, it is far from a conclusion.
A Bank of England survey released today showed that 42% of businesses in the UK believe that Brexit uncertainty will continue until at least 2021. This is in contrast to the Prime Minister’s assertions that the next phase of negotiations will be completed by the end of this year.
EU negotiators have been firm in their opinion that the 11-month deadline being promised by the PM would be very difficult to meet, and that a deadline extension will likely still be needed if a comprehensive deal is to be reached.
Businesses worry that the clarity they so desperately want will not be forthcoming anytime soon. This uncertainty continues to drag on the UK economy, with many business holding off on investment until they know more about Britain’s future trade landscape.
The renewed fears have pushed the Pound down 0.6% today – to $1.314 against the US Dollar – and down 0.36% to €1.177 against the Euro.
For the gold price this has resulted in a new-year boost of 1.52% in Sterling versus a more modest rise of 0.68% in Dollars for the same 24 hour period. This puts an ounce of gold at £1,161.97 today, and continues a small rally for gold since the general election.
Weak manufacturing data released this morning showed that factories across Europe continue to suffer from global slowdown. As a whole, the EU manufacturing sector contracted for its 11th month in a row.
The UK economy is also wallowing in Brexit paralysis, with the manufacturing sector contracting again in December. The British Chamber of Commerce has also released a report suggesting the UK economy ended the year in stagnation.
2019 saw recession fears grow significantly, and a number of countries (including the UK) only avoided this by narrow margins. Despite some initial optimism after the general election, the start of 2020 looks set to continue the 2019 trend of economic uncertainty.