- GBP / USD has closed at daily lows again after EU chief negotiator Barnier announced that no deal has yet been reached.
- The talks have stopped and British Prime Minister Johnson and the President of the EU Commission, von der Leyen, will discuss the situation tomorrow.
The GBP/USD It has again plunged towards the day’s lows at 1.3420 as Brexit hopes wane again and the USD rallied amid profit-taking ahead of the weekend. The pair is now trading just under 20 pips below the day or just over 0.1%.
Brexit hopes fade
EU Brexit negotiator Michel Barnier issued a statement on Twitter saying that after a week of intense negotiations in London, both sides agreed that the conditions for a deal had not been met, as significant differences on the issues remain. level playing field, governance and fisheries. Barnier added that the two sides agreed to pause the talks to allow time to brief directors on the status of the negotiations. EU Commission Chairman von der Leyen and British Prime Minister Johnson will discuss that situation on Saturday, Barnier added.
While several journalists warned the markets that a deal would not be reached on Friday, the news that the talks had stopped may have raised some concerns, as the GBP has dropped further in the G10 performance rankings to as market participants head for the door.
However, hopes for a breakthrough this weekend will continue ahead of tomorrow’s conversation between Johnson and von der Leyen. If they find a compromise and a deal is signed this weekend, markets are likely to react with glee at Monday’s Asia open. However, the French in particular have made it clear that they do not want any further concessions from the EU and will veto any deal they do not like.
A deal that is acceptable to both the UK and the majority of the EU may not be good enough for the French. Overcoming French resistance to aspects of any deal they don’t like is therefore a major hurdle that should overpower the British pound’s rise when a deal is announced.
USD hurt by this week’s losses
The GBP / USD downward contribution to recent trading has been a widespread rally in the USD, with the Dollar Index (DXY) rallying back to positive territory on the day, though still holding moderate well below the level of 91.00.
The USD has been hit this week by the usual bearish cocktail of factors including US fiscal stimulus and vaccine hopes, dovish Fed expectations, and an improved 2021 growth outlook. Therefore, maybe it’s right that the dollar sees a breather, amid potential profit-taking.
Many analysts still see the risks to the USD as a downtrend; Friday’s employment report makes more Fed action (moderate and negative USD) more likely, as well as greater fiscal stimulus (negative USD risk).
GBP / USD finds a new range
Mainly as a result of an extension of USD weakness, GBP / USD has broken out of its previous range of 1.3300ish-1.3400ish to find a new range at 1.3450. The pair is likely to remain choppy and difficult to trade, but on the downside, the 1.3400 level should offer decent support and, to the upside, this week’s high of 1.3539 is likely to offer some resistance.
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