A new round of post-Brexit trade negotiations with the EU will begin this week, with any comments from senior figures from both sides likely to be scrutinized by the market and could cause some volatility. The coronavirus has led to 21,000 more businesses closing down in March compared to March 2019, with this news keeping a lid on any more Sterling gains for the time being.
In response, the government has launched a £1.25bn fund to help UK start-ups that are struggling to cope with the impact of the virus. Bank of England Governor Bailey has backed estimates that suggest there may be a 35% drop on Q2 2020 GDP, calling it ‘not implausible’.
Italian PM Conte has mentioned again that it is important for the more effected countries in the EU to be helped by those less effected by sharing any debt issued during the pandemic. Further talks amongst finance ministers will resume today, although both Spanish PM Sanchez and French President Macron have warned about the future of the EU if this is rejected by the likes of Germany and The Netherlands. This has meant that the Euro has struggled to make any significant gains against other currencies. Spain has extended their lockdown restrictions and announced that next month will be the beginning of a slow return to normality. The EU’s economy minister, Gentiloni, believes that tripling the existing aid package valued at €500bn to €1.5tn may be necessary to deal with the economic impacts of the virus.
The Dollar has recovered slightly against the Pound after several US governors suggested that lockdown restrictions should be extended, leading to further risk-off appetite by the market. President Trump has said that the US is close to agreeing on a deal to stimulate the economy further, and could announce it as early as today if talks conclude swiftly. The US has announced a 3-month deferral in certain tariff payments for importers and manufacturers in order to free up cash for businesses affected by the virus.