Home » Currency Note » Currency Note » Customs union plan ruled out by May

Over the weekend, Theresa May confirmed that she has ruled out Jeremy Corbyn’s customs union plan. Instead, the Prime Minister has offered a concession on environmental and workers’ rights, but this is unlikely to be enough to gain the backing of the Labour Party. It has been suggested that May rejected the idea of accepting Corbyn’s demands through fear of splitting the Conservative Party.

The Communities Secretary, James Brokenshire, has said that if no finalised deal is put to the Commons by 27 February, MPs would again be given an amendable motion to consider, allowing them to block a no-deal departure or make other interventions. The deadline is fast approaching and business leaders across the UK have warned that something needs to be agreed soon. The head of the CBI, Carolyn Fairnburn, said the UK is ‘in the emergency zone of Brexit now’. The continued uncertainty will likely harm the UK as a long-term business destination.

Trade war fears reared their head once more towards the end of last week, as Trump said that a meeting between the US and China was ‘unlikely’. On 2 March 2019, US tariffs on Chinese goods are set to increase to 25% from 10% and financial markets around the world were hoping the situation could be resolved by then. However, the president said that the two sides would not meet before the deadline, suggesting that the increase will happen and the trade war will ratchet up once more.

Sterling suffered one of its worst weeks since October 2018 as the Brexit stalemate and the Bank of England’s assessment of the UK’s economic prospects weighed heavy on the pound. The central bank confirmed that the UK economy is set for the worst year since the financial crisis, as evidence suggests that Brexit anxiety is spreading from companies to consumers. The Bank has cut its growth forecast for 2019 from 1.7% to 1.2%.

Today is a very busy day for the UK, beginning with December’s balance of trade figures. We will also see the GDP growth rate for the fourth quarter of 2018 and industrial and manufacturing production figures. Sterling has opened lower this morning so it could be another bad week for the pound. Make sure you protect your budget from this volatility – speak to your Personal Trader on 020 7898 0541 to find out how.

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