UK Will Cut Tariffs, France and Germany Fight Pandemic Together

As the world's second epicenter after China, Europe, after months of hard work, had survived the worst period of the epidemic and gradually began to shift the focus to economic recovery. Large fluctuations are expected in the European forex market.

With the alleviation of the coronavirus pandemic, the UK continues the process of Brexit. A few days ago, the British government announced a new post-Brexit tariff system to replace the EU's common external tariffs. The British government stated that the new tariff system, known as the “British Global Tariff”, will be formally implemented on January 1st, 2021. Compared with the EU's common external tariffs, the new tariff will be simpler and cheaper. The new plan will see Britain's tariffs reduced by 30 billion pounds after Brexit. The news shortly propped up the pound to a new high in 4 trading days. However, the pound is still under test. Bearish factors, such as bumpy progress of the latest round of Brexit negotiations and the negative attitude of traders towards the pound, continue to affect the currency.

On the other hand, there have also been recent moves within the EU. In response to the severe economic recession caused by the epidemic, leaders of France and Germany supported the establishment of a European Union recovery fund of €500 billion (US$ 543 billion), which will be supported by joint borrowing from EU member states. Affected by this news, the euro once rose to its highest level since May 4th and finally closed higher. However, the plan still faces a blurry outlook as the final agreement will require the support of all 27 member states, while Austria immediately reaffirmed its objection to direct assistance. German Chancellor Angela Merkel said that the current EU treaty remains unchanged but may be changed in the future, which opens the door for further fiscal integration, a positive factor for the euro.

While countries began to restore their economies in the post-epidemic period, the different situations they're facing may lead to an unbalanced recovery pace, and there will still be greater uncertainties in forex markets.

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