AUS
NZ
UK
CA
USA
IND
Summary
- Pound could plunge by nearly 10 per cent against the US dollar in case Britain is unable to strike a trade deal with the EU
- The nation puts the Royal Navy on standby to protect its fishing waters from European boats
The pound sterling dropped by 1.2 per cent against the US dollar on December 11, reaching a four-week low value of $1.31, after Boris Johnson, the UK PM announced that a no-deal Brexit appeared very likely. Both the sides, namely the UK and the European Union have until Sunday to arrive at a mutually favourable trade deal.
Pound was also down by more than a cent against the euro on Friday, settling at a nearly three-month low figure of €1.08.
Until the last month, the British currency was going strong against the dollar and had reached a level of $1.35, which was nearly a one-year high.
Market experts said that in case the nation failed to finalise a deal with the EU by this Sunday, being the mutually agreed deadline to conclude a deal, the pound could crash by over 10 per cent. This would make the currency plunge below a value of $1.20. In fact, the currency could weaken even further as the British businesses would adjust to trading outside the European Union market, experts explained. Therefore, the currency traders are watching events nervously over the next 24 hours.
In the short-term, a weak pound will have two immediate effects. One, the imports would get costlier for the British consumers as well as companies which import raw materials etc. Two, the domestic exports might be able to cope up better with the Brexit shock as their products would get more competitive.
Johnson had gone to Brussels this Wednesday to meet Ursula von der Leyen, President of the European Commission to discuss the deal. However, the long-standing issues of fishing rights, dispute resolution, and state aid remained unresolved.
(Image Source: ©Kalkine Group 2020)
Britain readies for a no-deal scenario
The British Prime Minister has put four Royal Navy ships for patrol on standby to stop encroachment by European fishing vessels on the UK waters. The Royal Navy would be deploying its boats from January 1 to stop the French and other European boats from illegally entering the UK waters for fishing in the English Channel.
The offshore patrol boats would be deployed around the UK’s exclusive economic zone that stretches up to 200 nautical miles from its coastline. The boats would be carrying machine guns and shall have the power to inspect, halt, and impound any EU fishing boats that enter the area illegally.
This measure is seen as a signal of Britain preparing for a no-deal Brexit as tension mounts between the two trading partners. Political analysts indicated that UK is preparing to leave the common European market without a favourable trade deal, after the recent negotiations between the nation and the European Union have failed to deliver a breakthrough.
With merely 3 weeks remaining before the end of Brexit transition period on December 31, Johnson said that it was ‘very, very likely’ that the UK-EU talks end without any deal. This will leave both the sides trading with each other on basic terms of the World Trade Organisation.
