GBP: Bullish Sentiment Erased by Brexit Impasse
Fundamental Forecast for GBP: Neutral
Sterling (GBP) Talking Points:
- Chequers plan now looks dead in the water in its current format.
- The next two months is make-or-break for Brexit and UK PM Theresa May.
The DailyFX Q3 GBP Forecast is available to download.
The outlook for Sterling turns to neutral from bullish after a disastrous informal EU Summit meeting for UK PM Theresa May where her Chequers proposal was put to the sword by the EU 27. After starting the week well, with positive noises coming out of the EU over the proposal, the EU told the UK that the plan was unworkable and would need major revisions, something the UK has already ruled out. In normally circumstances, and these are anything but, a bearish view would be warranted but both sides still need to make an agreement as a no-deal would badly affect both economies. The sidelines remain the place to be for now.
Sterling volatility is expected to increase sharply in the coming weeks as the official EU Summit in October and the ‘emergency’ EU Summit in November come into view. The mid-November Summit is the last chance for a deal to be signed-off before the March 2019 Brexit date and is pivotal for Sterling’s short-, medium- and long-term direction. And before then the annual four-day Conservative Party conference, starting on September 30, may well see a fresh leadership challenge unless the PM can convince the party faithful to back her.
Next week’s data calendar is relatively clear aside from the final Q2 GDP release next Friday, although BoE governor Mark Carney will be on stage at a conference in Frankfurt on Thursday (14:00 GMT) and needs to be followed. GBPUSD traders should also be aware of a raft of heavyweight US economic data releases next week along with the latest FOMC meeting where US interest rates are fully expected to rise by another 0.25%.
The best Brexit-pair, EURGBP, shows how damaging the last 24 hours has been for Sterling sentiment with the pair rebounding sharply to a fresh two week high.
EURGBP Four Hour Price Chart (August 8 – September 21, 2018)
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at firstname.lastname@example.org
Follow Nick on Twitter @nickcawley1
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