GBP and Brexit: the catharsis

GBP and Brexit: the catharsis

2020-12-08 • Updated

Looking at the H4 chart, it is obvious that the British pound is going through increasing scales of instability. It is no surprise: Brexit is nearing its end, nothing is reached, and if it was a theatrical performance instead of a 9-month negotiation process, it would be the revelation scene now.

What’s happening?

The UK and the EU negotiators have failed to meet each other’s interests so far. They are pretty frankly admitting that, and most observers and officials are more pessimistic than not about the Brexit outcome. That’s the primary reason Boris Johnson flies to Brussels to speak to Ursula von der Leyen: if representatives fail to agree, let’s see if the country leaders do.

If you remember, there has been a lot of noise recently around the UK PM’s intention to unilaterally break the conditions of the divorce the UK agreed on before – something that he was pushing through the UK Parliament and that cost him a couple of his key aides (not to say a couple of millions of his supporters). Now, with the fact that neither the UK nor the EU wants to make the first step in giving concessions to the other party, Boris Johnsons’s comment that he is fine to step back on that intention may well be a tactical move so that he could come to Ursula von der Leyen with a phrase like “see, I already made my step – your turn now” with no cost. The tactic here is that you make false intimidation to your opponent first, then you back down on it with a now-agreeable approach seen as “already a step forward”, while you have made no true concessions on substance of the deal so far. A bluff, in other words. Many observers were discussing that before. Now it’s time to see if that works well – for the UK at least.

The price of a no-deal? They say it’s around 0.5% GDP for the EU, and 3% for the UK. So both sides would bear damage if no agreement takes place, but the UK will be definitely hit harder. Everyone knows that, the EU knows that, and that’s one of the reasons the EU is adamant on its position. So the vulnerability is the weak point of the UK, but the lack of unity is the weak point of the EU: the member countries have different interests. Say, if France has a lot of things to share with the UK, fisheries specifically, why would Germany suffer from its neighbor’s disagreement with the British counterpart?

That’s the rough sketch of the situation on the fundamental level. Let’s see the technical part now.

The GBP is obviously shaking.

Against the USD, it went up to 1.35 on good hopes for Brexit success. Then, it went down to almost 1.32 just recently. Currently, it trades below 1.34 – right at the median it’s been at since the end of November.

21.png

Against the EUR, there is a similar expansion of fluctuation, but within an upslope. After EUR/GBP took off from 0.89 on November 25, it never came back down there. Currently, it trades at around 0.9070 after bouncing off the heights above 0.91.   

22.png

Frankly, only now it seems that the GBP traders are “trading the reality” of the British pound. That is, an economic crisis unseen for the last 300 years in the UK (Rishi Sunak’s words), and Brexit about to fall off the cliff to the abyss.

Well, let’s see what Boris Johnson and Ursula von der Leyen come to.

                                                                                                      LOG IN

Similar

Stock Market Rally. How Far Can It Go?
Stock Market Rally. How Far Can It Go?

Global equities on Wall Street experienced a mixed session following the Thanksgiving holiday, heading for the most significant one-month rally since November 2020. MSCI's global shares index slightly eased but was still on track for an 8.5% monthly gain, fueled by growing investor confidence that U.S. interest rates...

How will the reporting season affect US indices?
How will the reporting season affect US indices?

Earnings season is a crucial time for investors and analysts, as it provides insights into how well companies have performed over the past quarter and gives indications of their future earnings. In 2023, expectations for US Q1 earnings were low due to economic challenges and rising interest rates. Surprisingly, many companies beat these low expectations, with 75% of S&P 500 companies surpassing forecasts.

Stocks to trade in July
Stocks to trade in July

When I started trading stocks a few years ago, I often needed to pay more attention to my technical analysis skills and trust that the market would play fair according to my analysis. I have since discovered that the safer approach to trading stocks is to, more often than not, seek out investing opportunities - that is, catching stock commodities with a potential to rise.

Latest news

Bitcoin 2024: The Story Is Cyclical
Bitcoin 2024: The Story Is Cyclical

In the dynamic world of financial trading, understanding the nuanced relationship between the Federal Reserve's key interest rates and Bitcoin can be a game-changer…

Will NFP Be Positive for the US Dollar?
Will NFP Be Positive for the US Dollar?

As the US Non-Farm Payrolls (NFP) take center stage, this month's data gains special attention, particularly after the unemployment rate took a concerning turn in the previous month. The US ADP Employment Change reveals a significant decline, with the economy adding 298K new jobs...

Deposit with your local payment systems

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera