GBP dropped on Brexit impasse

GBP dropped on Brexit impasse

2020-12-07 • Updated

What happened?

The European Union and the United Kingdom haven’t been able to reach the Brexit deal so far. The EU Chief Negotiator Michel Barnier publicly refused that both sides are getting closer to any progress. The main sticking points are access to UK fishing waters and the level playing field (a set of rules that stop businesses of one country from having competitive advantages in other countries).

According to Sun, Prime Minister Boris Johnson is ready to abandon EU-UK negotiations. If it really happens, the UK economy will collapse in the short term: GDP is expected to fall by 2%. In addition, taxes on exports to the EU will rise enormously: for automakers by 7%, while for farmers – by 35.4%. Obviously, it will be better for both sides, if they can reach a compromise.

Market reaction

The prospect of the no-deal Brexit pushed the pound down. Just look at the huge swing down of GBP/USD on the chart below!

Technical tips

GBP/USD dropped below the key support of 1.3300. After the breakout, it retraced back to this level, but it’s likely to bounce off 1.3300 and continue falling further. The move below 1.3200 will drive the pair down to the low of November 12 at 1.3120. In the opposite scenario, if it jumps above the resistance of 1.3300, the way up to the recent highs of 1.3400 will be open. Follow news about Brexit further not to miss important developments that will impact the pound!

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