Forex Signals – no deal between UK and EU

LONDON (Reuters) – Societe Generale (OTC:SCGLY) analysts said on Thursday they now see an 80% chance that Britain and the European Union will fail to strike a trade deal before the end of the year. – Forex Trading Basics

British Prime Minister Boris Johnson has unveiled legislation that would break parts of the Brexit divorce treaty relating to Northern Ireland. The EU says any breach of the Brexit treaty could sink trade talks and thus complicate the border between the United Kingdom’s Northern Ireland and EU-member Ireland. Forex Trading Strategies

Dollar off two-year low

SocGen analysts said that whether or not the planned legislation, the Internal Market Bill, is passed in a form that maintains this feature, the level of trust between Britain and the EU had been “gravely damaged”.

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“With PM Johnson likely to continue his high-stakes negotiating strategy, we no longer think a deal can be struck before year-end. We now see an 80% probability of a No Deal,” they said in a note.

“The UK economy is likely to be dealt another (avoidable) blow that it could well do without.”

The dollar pushed higher in early European trade Thursday, after the Federal Reserve failed to deliver any suggestion of more monetary stimulus in the near term. However, further currency weakness looks likely further ahead.

At 2:50 AM ET (0650 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.4% at 93.450, while the EUR/USD dropped 0.4% at 1.1768, hitting a one-month low – Forex Signals – no deal between UK and EU

At its first policy meeting since introducing a more tolerant stance on inflation, the Fed pledged to keep rates near zero until at least the end of 2023. Particularly as the Fed also lifted its expectations for both employment and inflation.

That said, “there was nothing really in the FOMC statement or the projections to un-nerve the conviction view that reflationary Fed policy is a dollar negative,” wrote analysts at ING, in a research note.

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“Key components to this summer’s dollar decline have been the sense of recovery (today’s Fed upgrades to 2020 GDP and employment forecasts help here) and ultra-low rates (unchanged policy Fed policy through 2023 also help) resulting in real yields deep in negative territory,” ING added.

Analysts at Nordea also argued that any boost to the dollar from this latest Fed statement will be a short-term phenomenon.

“A (much) weaker USD will be a focal point in the Fed’s fight for higher inflation. Not so much due to the directly imported inflationary impulse, but much more due to the easier financial conditions that follow,” wrote Nordea’s Andreas Steno Larsen, in a research note.

Forex Signals – no deal between UK and EU

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