British Pound Braces for Boris Johnson's New Brexit Deal
Brexit, GBP Outlook
- Sterling traders brace for politically-induced volatility
- October 31 Brexit deadline continues to pressure GBP
- GBP expected to be most volatile G10 vs USD this week
Learn how to use political-risk analysis in your trading strategy!
Asian Markets: What Happened?
APAC equities were swimming in a sea of red, echoing losses sustained during Wall Street’s trading hours. The cause appears to have been the publication of sour US ISM manufacturing data that came in at decade lows and spurred risk aversion and fear about global growth. During the Asia session, GBP was modestly lower against most of its major counterparts in light of the latest Brexit updates… But that will likely change.
GBP and Brexit: What’s Happening?
Markets will be bracing for what could be a volatile day ahead of UK Prime Minister Boris Johnson’s reveal of his new Brexit plan. He has reiterated that if the EU does not embrace his proposal, he will keep good on his word and let the UK leave the European Union without a deal. With the October 31 deadline in sight, policymakers on both sides are getting more anxious in finding a way to break the deadlock.
However, Mr. Johnson has to contend with a recent law passed by parliament that forces him to ask for an extension unless he is able to secure a deal during the EU summit on October 17. The biggest hurdle pertains to the Irish Backstop which was initially crafted to ensure no hard border was to be erected following the UK’s departure. Brussels has reiterated it will accept no deal that entails checkpoints or a hard border.
According to The Telegraph, Mr. Johnson’s new proposal would allow Ireland to have a special relationship with the EU until 2025, at which point Belfast would have to then choose between following Europe’s or Britain’s laws and regulations. What traders will now be eagerly waiting for is the response from Brussels and whether they are willing to entertain Mr. Johnson’s ideas or reject them. Either way, GBP is tensing up.
Chart of the Day: GBP Expected to be Most Volatile G10 vs USD in the Week Ahead
GBP TRADING RESOURCES
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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.