Written by Susannah Streeter, head of money and markets, Hargreaves Lansdown
There’s extra jaunt to the upbeat mood on the markets now that a deal to break the trade impasse between the EU and the UK has finally been struck.
The FTSE 100 and FTSE 250 edged higher as an extra jot of confidence was restored in the UK economy.
The pound has jumped above $1.20 in a small relief rally that the deadlock has been broken, but there is still a long way to go before these better relations will herald a significant recovery in cross border trade.
Brexit has cast such a long shadow over the UK economy, that the lights of opportunity will need to shine more brightly before the pound undergoes a big further rebound. It’s still down some 14% on its pre-pandemic level as the strength of the dollar continues to limit gains, given interest rates expectations in the US.
Against the euro, it’s still down 5% compared to three years ago. This new consensual approach should help for other thorny political problems, such as migration, but it’s unlikely to move the dial much for a big uplift to UK exports immediately. Nevertheless, a picture of improvement is being built up bit by bit and will add to hopes that any recession ahead will be milder.
