European session review: GBP mostly lower as approval of UK's internal market bill and coronavirus concerns outweigh BoE’s chief economists' comments on negative rates and upwardly revised UK GDP data

GBP fell against most other major currencies in the European session on Wednesday, weighed down by the approval of the controversial UK government's internal market bill by Britain’s lower house of parliament.

The House of Commons approved the bill to regulate the UK's internal market after Brexit by 340 votes to 256 on Tuesday night. The passage of the bill that breaches Britain's EU divorce treaty was an expected event. The UK's government argued that the clauses in the bill which override the Withdrawal Agreement would only be used if talks on a border solution with the EU fail, and if a deal could be reached on the Irish border, the powers might not be needed. The legislation will now go to the House of Lords for debate.

Meanwhile, the final round of the UK-EU talks on a post-Brexit trade deal is continuing. The market participants believe that the sides could reach an agreement.

The pound remained also pressured by concerns over a resurgence in coronavirus cases in the UK. The UK's Prime Minister Boris Johnson is to hold a news conference on COVID-19 later today as he grapples with a second wave of the pandemic. 

Elsewhere, the Bank of England's (BoE) chief economist Andy Haldane downplayed the possibility of an introduction of negative rates in near future. In his speech on Wednesday, he said that none of the conditions for negative rates had been satisfied and that the operational work necessary to assess the feasibility of negative rates is likely to take a number of months. At the same time, he said the central bank is committed to keeping borrowing costs at the extraordinary low levels.

A report from the Office for National Statistics (ONS) revealed that the UK’s economy contracted less than initially estimated in the second quarter of 2020. According to the final estimate, the UK gross domestic product (GDP) fell at a 19.8 percent q-o-q in the second quarter, slower than a 20.4 percent q-o-q drop reported in the advance estimate. Still, this is the largest quarterly contraction ever and the second consecutive quarterly drop in GDP. Economists had expected the decline rate to be unrevised at 20.4 percent q-o-q, following the first quarter's decrease of 2.5 percent q-o-q (revised from -2.2 percent).