Brexit Update, GBPUSD Holds $1.30
Fiona Cincotta October 24, 2020 1:24 AM
A week ago, Boris Johnson’s soft Brexit deadline, turned out to be much softer than the market anticipated. Talks are back on and GBPUSD trades over the key $1.30 level.
A week ago, Boris Johnson’s soft Brexit deadline, turned out to be much softer than the market anticipated. After withdrawing from trade negotiations over a lack of progress, Boris Johnson and co were once again back round the negotiating table on Thursday trying to hammer out a trade deal before it’s too late. So, what happened?
Firstly a speech by Michel Barnier in which he said “both sides needed to work constructively” was considered a gesture by London which was jumped on quickly, particularly as the EU had just days earlier said just the UK needed to work hard.
Renewed hopes for a deal booster GBPUSD 1.5% on Wednesday pushing the pair back over $1.30 for the first time since early September hitting a 6-week high of US$1.3178.
• Access to UK fishing waters
• State aid
• How to manage legal disputes once the deal is in place.
Frustrations over the lack of progress have seen GBPUSD gradually give background across the last two days of the week. Whilst the pair remains above the crucial $1.30 psychological level, it has given shed -0.8% in 2 days. However, across the week as a whole GBP/USD remains up +0.9% reflecting the improved mood surrounding the chances of a deal.
Significant gaps remain between the two sides and in very key areas. It remains to be seen if these differences can be bridged in the intensive talks.
Whilst no new timetable for talks leading to a deal has been created, expectations are now for an agreement in early November.
26th November: a trade deal must be presented to the European Parliament by this data is ordered to allow sufficient time for it to be ratified
10th – 11th December European Council Meeting: This is considered too late in the day for a deal to be confirmed. However, as with all things Brexit, where there is a will there is a way and deadline which once appeared hard have in other occasions softened.
As the UK (and Europe) struggle with rising covid cases and tightening lockdown restrictions, the fragile economic recovery looks set to be derailed and fears of a double dip recession are building. Given this backdrop and despite the dangerous games of brinkmanship a no deal Brexit looks like an economic shock that both sides will want to avoid at all costs.
GBP/USD trades firmly above its 50,100 & 200 sma on the 4-hour chart, as well as above the ascending trendline dating from late September – a bullish chart. The 50 & 100 sma also cross over the 200 often considered a buy signal.
Immediate resistance can be seen at $1.3178 Wednesday’s high. Meanwhile support can be seen at 1.30 the psychological level and 50 sma. A breakthrough here could open the door to $1.2950 trendline support prior to horizontal support to 1.2850.
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