British Pound (GBP) Latest: Brexit Deadline, Covid Surge, Whitehall Infighting
Brexit Outlook and Sterling (GBP/USD) Price, Analysis and Chart:
- Brexit deadlines loom and Sterling volatility may jump.
- UK PM Johnson’s leadership is under scrutiny
The UK government is in full-on fire-fighting mode as political infighting, Brexit deadlines and a record surge in coronavirus cases all land on the Prime Minister’s desk. The PM’s chief adviser Dominic Cummings is said to be leaving his role by Christmas as the fallout from the departure of communications director Lee Cain continues, while Brexit policy adviser Oliver Letwin is also said to be considering his position.
All this political infighting comes ahead of the latest Brexit deadline this Sunday, with little progress seen in the EU/UK trade talks. This deadline is likely to be pushed back until next Thursday, November 19, when the EU leaders are scheduled to speak and this meeting may decide if Brexit talks continue or not.
In addition to this, yesterday’s surge in new coronavirus cases will add additional pressure on the Prime Minister. Thursday saw nearly 33,500 new cases announced, compared to just under 23,000 on Wednesday, an unwanted one-day record and 39% more week-on-week.
EUR/GBP is starting to show signs of Brexit-stress this week after having moved lower over the last two months in anticipation of an EU/UK trade deal. The pair just touched a five-month low on Wednesday before jumping higher as traders began pricing-in the latest batch of bad news. The pair are currently stuck between the 20- and 200-day simple moving averages with the 38.2% fib at 0.9035 and the 50% fib at 0.8891 the next layer of resistance and support respectively. While volatility in the pair remains low, using the ATR indicator, this is likely to increase next week as we near the latest Brexit deadline.
EUR/GBP Daily Price Chart (March – November 13, 2020)
IG client sentiment data show48.49% of traders are net-long with the ratio of traders short to long at 1.06 to 1. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/GBP-bullish contrarian trading bias.
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