Brexit Briefing: GBP/USD Stabilizes Despite Doubts About Trade Talks
GBP price, Brexit news and analysis:
- GBP/USD has steadied after jumping in the wake of Thursday’s UK General Election and then falling back.
- UK Prime Minister Boris Johnson’s decision to rule out an extension of the Brexit transition period beyond December 2020 could lead to only a basic free trade agreement between the UK and the EU by this time next year.
GBP/USD settles at lower levels
UK Prime Minister Boris Johnson’s decision to legislate to prevent an extension of the Brexit transition period beyond the end of 2020 could rule out a comprehensive deal between the EU and the UK after the UK leaves the bloc at the end of next month.
According to The Guardian newspaper, a leaked diplomatic note suggests the European Commission and EU member states have concluded that the UK’s “negotiation commitment does not afford much space for broader ambitions” beyond a “basic free trade agreement”.
GBP/USD Price Chart, One-Hour Timeframe (December 12-18, 2019)
Chart by IG (You can click on it for a larger image)
Fears of a no-deal Brexit at the end of the transition period were largely responsible for the decline in GBP/USD from last Friday’s highs. However, political analysts have pointed out that the decision to limit the talks to just 11 months could easily be reversed.
Moreover, comments by outgoing Bank of England Governor Mark Carney, who said Monday that the probability of a no-deal Brexit has decreased, have helped to steady nerves. So has a comment by the Fitch rating agency Tuesday that the outcome of last Thursday’s UK General Election has significantly reduced the very near-term risk of a no-deal Brexit.
Fitch affirmed the UK’s debt rating at AA, while adding that the outlook for its rating is negative.
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--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.