GBP price, Brexit news and UK inflation:
- UK inflation dropped by far more than expected year/year last month, with the month/month rate falling into negative territory.
- However, that has had little impact on GBP/USD, which remains firm as it has all week.
- The main driver of GBP remains the post-Brexit trade talks between the EU and the UK, with traders still broadly optimistic that a deal can be reached.
- European Commission President Ursula von der Leyen boosted sentiment Wednesday with some optimistic comments.
- Sentiment could still change quickly though as further headlines hit the wires suggesting the two sides are either coming closer or moving further apart.
GBP/USD Rally Remains Intact
GBP/USD is continuing this week’s advance as hopes rise of a post-Brexit trade deal between the EU and the UK. Note, though, that it remains vulnerable to headlines hitting the news wires from both sides suggesting that either they are closer to an agreement or that the gap between them remains sizeable.
In the latest development, European Commission President Ursula von der Leyen told Members of the European Parliament that “there is a path to an agreement now. The path may be very narrow, but it is there.” However, she also said “it sometimes feels that we will not be able to resolve this question” and she told MEPs that fisheries and the level playing field remain obstacles to a trade deal.
GBP/USD Price Chart, One-Hour Timeframe (December 10-16, 2020)
Source: IG (You can click on the chart for a larger image)
| Change in | Longs | Shorts | OI |
| Daily | 1% | -2% | 0% |
| Weekly | -2% | -14% | -5% |
With trading in GBP/USD and the GBP crosses so fixated on the negotiations, there was little reaction Wednesday to the latest UK inflation figures, which showed a much steeper than expected fall year/year last month and a drop into negative territory month/month.
UK Inflation Weakens in November
Source: DailyFX
The UK’s Office for National Statistics, which compiles the data, attributed the falls to Black Friday discounts by retailers. “The price fall in November this year reflects increased discounting and there have been media reports that some Black Friday sales may have spread further across the month, the ONS said.
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--- Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex
