News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bearish
Wall Street
Bearish
Gold
Mixed
GBP/USD
Bullish
USD/JPY
Bearish
More View more
Real Time News
  • US Eight-Week Bills Draw 0.090% Primary Dealers Awarded: 49.6% Indirect Bidders Accepted: 39.6% Direct Bidders Accepted: 10.8% B/C Ratio: 3.51
  • If the market's speculative leaders and its once-leading speculative catalysts can't reinvigorate a well-established bull trend, something significant is anchoring us
  • curious to see the results on this poll 👇 https://t.co/Yd0YgmUky5
  • We are now less than two weeks away from the US Presidential Election 🇺🇸. What do you think the #FX market impact will be?
  • Pelosi says 'just about there' on relief deal - BBG
  • $CSX - the rail shipping company that I consider a good proxy to growth - managed announced its $5 billion share buyback last night, which is cat nip to stocks, and it too can't follow through on its opening gap
  • Tesla offered up an earnings beat last night and the speculative favorite that is up 412% (!) on the year is spinning its tires today in the aftermath
  • Forex Update: As of 14:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.19% 🇨🇦CAD: -0.03% 🇯🇵JPY: -0.21% 🇦🇺AUD: -0.26% 🇪🇺EUR: -0.34% 🇬🇧GBP: -0.52% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/UHRqYP6B9B
  • Indices Update: As of 14:00, these are your best and worst performers based on the London trading schedule: FTSE 100: -0.20% France 40: -0.54% Wall Street: -0.56% US 500: -0.56% Germany 30: -0.74% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/4jhGSElskq
  • Though the US government continues to string the markets along with hopes of a stimulus that are consistently pushed out, risk appetite is holding up. That said, it is one of the principal interests right now; so I wouldn't bank on complacency holding forever... https://t.co/BESRl3MnA6
GBP/USD To Extend Slide on No-Deal Brexit Fears, Covid-19 Second Wave

GBP/USD To Extend Slide on No-Deal Brexit Fears, Covid-19 Second Wave

2020-09-21 07:00:00
Daniel Moss, Analyst
Share:

British Pound, GBP/USD, Brexit, UK-EU Trade Relations, Bank of England – Talking Points:

  • The US Dollar extended its slide lower during Asia-Pacific trade.
  • The Bank of England’s continued discussions on the effectiveness of negative rates may weigh on the British Pound.
  • GBP/USD poised to break lower as price carves out a Bear Flag just above key support.

Asia-Pacific Recap

The haven-associated US Dollar resumed it slide lower against its major counterparts during Asia-Pacific trade, as the risk-sensitive Australian Dollar climbed back above the 0.73 level.

Asian equities broadly declined, led by Hong Kong’s Hang Seng Index, which plunged over 1.5% after HSBC was placed on China’s ‘unreliable list’.

Gold and silver dipped lower alongside crude oil, while platinum and palladium crept higher.

Looking ahead, speeches from ECB President Christine Lagarde and multiple Federal Reserve members headline a rather light economic docket.

GBP/USD To Extend Slide on No-Deal Brexit Fears, Covid-19 Second Wave

Market reaction chart created using TradingView

BoE Negative Rate Talk Capping British Pound

The Bank of England’s continued discussions on “the effectiveness of negative policy rates” could weigh on the performance of the politically-sensitive British Pound in the coming months, with the Monetary Policy Committee (MPC) being “briefed on the Bank of England’s plan to explore how a negative Bank Rate could be implemented effectively” at its September meeting.

In fact, the central bank took it a step further at its recent monetary policy meeting, stating that “the Bank of England and the Prudential Regulation Authority will begin structured engagement on the operational considerations [of negative rates] in 2020 Q4”.

This suggests that British policymakers are actively considering taking the Bank Rate into negative territory “should the outlook for inflation and output warrant it at some point during this period of low equilibrium rates”

That being said, with all MPC members judging that “the existing stance of monetary policy remained appropriate at this meeting” it appears additional stimulus measures may be off the table until early next year.

Nevertheless, deteriorating Brexit negotiations and a worrying surge in Covid-19 cases may force the hand of the central bank and in turn drag on the local currency against its major counterparts.

GBP/USD To Extend Slide on No-Deal Brexit Fears, Covid-19 Second Wave

Source – Bank of England

Deteriorating Brexit Negotiations Impeding GBP/USD

Although European Commission President Ursula von der Leyen is “convinced” that a deal with the United Kingdom is possible, it seems unlikely that with “significant gaps remaining in key areas, including fisheries and subsidies” that an all-encompassing trade deal can be successfully ratified in time to avoid a dreaded “no-deal” Brexit.

Moreover, UK Prime Minister Boris Johnson’s decision to introduce legislation allowing the nullification of parts of the Brexit agreement with the European Union could put further strain on the pivotal relationship between the two regions. Johnson moved forward with the bill despite the Government openly admitting that it would violate international law.

Furthermore, the Prime Minister’s decision has been met with global condemnation and prompted US Democratic presidential nominee Joe Biden to state that “we can’t allow the Good Friday Agreement that brought peace to Northern Ireland to become a casualty of Brexit [and] any trade deal between the US and UK must be contingent upon respect for the Agreement and preventing the return of a hard border”.

Trading Forex News: The Strategy
Trading Forex News: The Strategy
Recommended by Daniel Moss
Trading Forex News: The Strategy
Get My Guide

Of course, Mr Biden is still running in a hotly contested debate with incumbent President Donald Trump and although he currently leads the polls against his Republican counterpart, it is hardly a certainty that he will be successful come November 3.

Nonetheless, the Democratic nominee’s statements may begin to hold more weigh over the next 6 weeks and could begin to have a material impact on the GBP/USD exchange rate if Biden continues to increase his lead in the polls.

To that end, GBP/USD seems poised to extend its slide from the monthly high amid deteriorating Brexit negotiations, rising cases of Covid-19 and a BoE ready to introduce a negative interest rate policy if the situation calls for it.

GBP/USD Daily Chart – Bear Flag Pattern in Play

GBP/USD To Extend Slide on No-Deal Brexit Fears, Covid-19 Second Wave

GBP/USD daily chart created using TradingView

As noted in previous reports, the GBP/USD exchange rate appears to be gearing up to extend its slide from the yearly high (1.3483), as price carves out a Bear Flag continuation pattern just above the sentiment-defining 200-day moving average (1.2760).

With both the RSI and MACD indicators tracking below their neutral midpoints, the path of least resistance looks to be lower.

Inability to break above the psychologically imposing 1.30 level could signal the resumption of the downtrend extending from the September high (1.3483), with a break below flag support (1.2762) probably igniting an impulsive downside push to test support at the 61.8% Fibonacci (1.2613).

Conversely, a daily close back above the August low (1.2981) could encourage would-be buyers and bring about a retest of the March high, if GBP/USD can overcome 21-DMA resistance (1.3093)

GBP/USD BULLISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 9% 10% 10%
Weekly -9% 52% 23%
What does it mean for price action?
Get My Guide

-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by Daniel Moss
Improve your trading with IG Client Sentiment Data
Get My Guide

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES