European session review: GBP mixed, as concerns over the stalemate in UK-EU trade talks were partially offset by data showing UK’s economy recovering

GBP traded mixed against other major currencies in the European session on Friday, as worries of a no-deal outcome of current UK-EU trade negotiations were partially offset by the UK’s GDP data showing the economy expanded for the third straight month in July as coronavirus restrictions continued to ease. The pound rose against USD, CHF and JPY, but fell against EUR, AUD and NZD.

Risk of a no-deal increased significantly this week after the UK’s government introduced a bill, which would overwrite the Brexit Withdrawal Agreement, - the step, which was appraised by the European Commission (EC) Vice-President Maroš Šefčovič as the move that “has seriously damaged trust between the EU and the UK”. Šefčovič also stated that  “if the Bill were to be adopted, it would constitute an extremely serious violation of the Withdrawal Agreement and of international law”. 

The EC spokesman said earlier today that the EU would consider the next Brexit steps after the end-September deadline. "We are going to wait for the reaction of the UK by that deadline and we will consider the next steps once we have reached that particular bridge”, he said. “And in the meantime, we will make no further comment." 

The Office for National Statistics (ONS) reported that the UK’s GDP expanded 6.6 percent m-o-m in July, following an 8.7 percent m-o-m gain in June. GDP was forecast to increase 6.7 percent m-o-m. In y-o-y terms, the UK’s GDP shrank 11.7 percent in July, compared to a 16.8 percent plunge in June and economists forecasts of an 11.3 percent decline. In the three months to July, GDP contracted 7.6 percent, following a record 20.4 percent tumble in the three months to June. Economists had forecast a 7.5 percent fall.