Pound dips down after no-Brexit deal

The UK Prime Minister Boris Johnson claimed that the Brexit agreement may come to a dead end as both sides decline to meet it halfway. He mentioned: “if no deal reached by October 15 with the EU, both sides should accept that and move.” Moreover, the Financial Times stated that the UK Government is going to impose new laws that can nullify some significant issues of the Brexit deal. That in turn makes the failure of the Brexit agreement quite possible.

EU-UK negotiations are scheduled for this week. Both sides have to reach an agreement by mid-October to prepare the ground for the soft Brexit at the end of this year. The delay will weigh on the British economy and add more obstacles for the soon recovery.

JPMorgan strategists claimed: “our economist’s assessment remains that the chance of no-deal is about a third, but with brinksmanship part of the process it may appear higher than that in coming weeks before agreement is reached”.

Long story short, there are strong factors for the further GBP’s falling such as the stronger USD and risks over no-deal Brexit. Moreover, there are no significant events on the economic calendar to change the current sentiment.

Technical tips

According to Credit Agricole SA, the British pound is going to plummet to 1.20 in case of the impasse over the Brexit deal. Keep that in mind, but for now let’s focus on the short term. If GBP/USD falls below the low of August 27 at 1.3180, the doors towards the next support of 1.3125 will be open. In the opposite scenario, the move above the resistance of 1.3250, which the pair has touched a few times already, will push the pound to the next resistance of 1.3350. Watch out levels and follow further news!

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Kseniya Medik