British Pound (GBP) Latest: Outlook Bleak as Brexit Slide Continues
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GBP price, Brexit news and analysis:
- Both UK Prime Minister Boris Johnson and EU chief negotiator Michel Barnier are taking hardline positions ahead of Brexit negotiations that will begin shortly.
- Despite two days of Sterling frailty, that suggests GBP/USD weakness and EUR/GBP strength will likely persist.
GBP/USD outlook poor as both sides of the Brexit negotiations take hard line
GBP/USD may well take a breather after the falls so far this week but the outlook for the pair is poor as both UK Prime Minister Boris Johnson and EU chief negotiator Michel Barnier make clear that the two sides are still way apart ahead of negotiations on UK-EU relations now Brexit has taken place. Similarly, further EUR/GBP gains are on the cards.
In a speech Monday, Johnson said there is “no need” for the UK to follow EU rules and called for a Canada-style free trade deal, saying the UK would return to the Withdrawal Agreement if such a deal was not reached.But the EU’s Barnier said its “ambitious” trade deal offer required a “level playing field”.
In response Sterling has fallen against a strong US Dollar to its lowest level since Christmas Eve and the outlook remains poor. Moreover, it is not yet oversold, although a small rally cannot be ruled out before weakness returns.
GBP/USD Price Chart, Daily Timeframe (December 5, 2019 – February 4, 2020)
Chart by IG (You can click on it for a larger image)
With Johnson likely to lay down tough terms for a post-Brexit deal and the EU wanting alignment, GBP is vulnerable to further setbacks and the latest positioning data from the Commitments of Traders’ report showed that large speculators’ bullish bets on Sterling have moderated. GBP/USD could slide to around 1.2910, where previous resistance from a downward sloping trendline now provides support.
The outlook remains bright, though, for the FTSE 100 index of leading London-listed stocks. As many of the companies in the index have a global reach, they would benefit in overseas markets from Sterling weakness.
We look at Sterling regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts
--- Written by Martin Essex, Analyst and Editor
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.