Sterling could weaken ahead of Preliminary EU-UK Trade Talks as the UK’s departure from the European Union makes it more likely that negotiations would need to take place at a higher level of speed. However, this does not mean that the UK cannot gain access to other markets, and the gains are huge.
Sterling is a very strong currency in the context of the rest of the world due to its relationship with the US Dollar. Therefore, this means that when the US Dollar depreciates against other currencies, then the pound can also depreciate (or rise) in the same way.
This will happen because countries outside the EU trade more and therefore they would have a greater desire to have access to these markets as well. It is possible that the UK will not be able to negotiate a bilateral deal that allows it to trade freely in one of these markets.
These trading partners include some of the largest economies in the world, namely the United States, Japan, Australia, Canada, and most importantly, the European Union. The EU comprises over 50% of the world’s population and it has a trade volume roughly equal to the US and China.
If the UK were to continue on the same trading levels as it was at during the period prior to the UK’s withdrawal from the EU, this would mean that the British economy would only compete against the economies of European countries. In addition, the UK would not be able to create its own external trading market, therefore it would only benefit from the trade deals it has with the EU and the USA.
Although the economy may experience a significant decline in trade over the next few years, the referendum will likely allow the UK to renegotiate some trade deals, and this can only be beneficial for the British economy. Sterling is also very attractive in comparison to theEuro as well as the US Dollar, so if it was seen that the UK could be able to maintain the current trading level, this would imply that the Bank of England was going to raise interest rates in order to maintain economic growth.
There have been many issues surrounding the negotiations of the Preliminary Trade Talks between the UK and the EU. In recent days, there has been much speculation regarding the issue of agriculture and animal welfare laws, which are needed to make sure that animals are treated humanely.
If the UK were to leave the EU on animal welfare grounds, then this would affect agricultural trade in the UK and this could lead to lower prices for consumers. Obviously, this would hit agricultural producers hard, but this could be considered a victory for consumers.
This could lead to more production, and therefore the country could become better off through increased trade deals, while other countries would not. The EU would benefit as well, as animal rights would put pressure on other countries in other fields, like in the fishing industry.
The ongoing debate could mean that Brexit becomes more likely, especially if the EU is able to win concessions on some of its trade deals with the UK. This is why the government must be careful in how it negotiates the deal.
For now, the Preliminary Trade Talks is going to be an extremely important part of the British economy. They can either boost the economy, or they can be extremely damaging, but if the negotiation goes smoothly, it could lead to great growth.