Brexit Concerns Weigh Pound Sterling Lower As EU and the UK Differences Persist

Brexit Concerns Weigh Pound Sterling Lower As EU and the UK Differences Persist

Sterling unfolds lower today in a calm holiday atmosphere. Sellers are back in control as there appears to be no way out of the stalemate in Brexit trade negotiations. And time is running out. Overall, the yen and dollar remain the worst performers of the week due to general optimism about coronavirus vaccines. The New Zealand dollar remains the strongest, while the Australian dollar ignores Chinese duties and remains in second place.

EU head of Brexit negotiations Michel Barnier confirmed that he is traveling to London tonight to continue personal trade talks with the UK over the weekend. But he also noted that “similarly significant differences remain”. An unnamed EU official said Barnier told national diplomats that “the gaps in the level playing field, governance, and fisheries remain large”

On the British side, Prime Minister Boris Johnson said: “There are significant and important differences that still need to be overcome, but we continue to do so.” He added: “The likelihood of a deal is largely determined by our friends and partners in the EU – there is a deal that needs to be done if they want it.”
Pound Sterling Pressured on Renewed No Deal Brexit
GBP/USD hit new highs as optimism about an upcoming vaccine in the UK and a smooth US transition outweighed Brexit uncertainty and upbeat US data. Brexit, Powell, and nonfarm payrolls promise a tumultuous start to December. However, British Prime Minister Boris Johnson noted that significant and important differences remain to be resolved during the negotiations, and said the UK can thrive with or without a deal.

These comments resulted in a loss in GBP/USD of nearly 40 pips in a matter of minutes. Besides, the UK’s FTSE 100 lost momentum due to cautious market sentiment and most recently lost 0.5% to 6,331. On the other hand, the US dollar index remains relatively calm on Friday, allowing GBP/USD for a while to limit losses.

GBP/USD continues to lose upside potential, as seen 4 hours later, and intraday bias has become neutral. If it rises above 1.3397, the pair will first target the resistance at 1.3498. A decisive break of the 1.3482 high will resume full gains from 1.1409. Further rally to 61.8% of the 1.1409 forecasts to 1.3482 from 1.2675 to 1.3956 further should then be seen.

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Author : Azeez Mustapha

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Azeez Mustapha is an experienced author, trader, markets analyst, signals strategist, and funds-manager.