FXStreet reports that UK-EU trade risks may be receding, according to economists at MUFG Bank. Therefore, the outlook for the pound remains positive.

“We continue to run a long GBP/USD trade idea. The grounds for this view is the notable shift in the UK rates market after the Bank of England effectively abandoned the idea of cutting rates into negative territory which has seen the short end of the rates market take out the risk of rates turning negative. The momentum in the rates market was further reinforced by the speed of the vaccine roll-out, with 23% of the population now vaccinated with at least one dose.”

“The risk of an escalation of friction on the border between the UK and the EU appears to be receding now with data from a logistics company, Transporeon reporting that the rejection rate for cargo shipped from France to the UK had fallen to its lowest level since the last week of November.”

“A test of the 1.4000 level in GBP/USD looks inevitable now at this stage with the outlook remaining favourable for now.”