GBP/USD: Is The 200-Pip Collapse A Buying Opportunity? State Of Brexit Talks

Taking the stairs up and the lift down – this typical pattern in stock markets is now visible in GBP/USD, which has lost its hard-earned gains amid fears that Brexit talks collapse.

UK Prime Minister Boris Johnson is reportedly ready to abandon talks “within hours” if the EU does not retract its latest demands. This headline from The Sun turned a modest decline in the cable into a spiraling free-fall. Is it just posturing – meant for the local audience – before a final handshake? If that is the case, there is a major buying opportunity.

Where do Brexit talks stand?

The three thorny topics are still unresolved. On fisheries, a minuscule yet politically sensitive industry, there has been progressing but it is unclear how disputes related to quotas would be resolved. France reportedly made demands on the topic, as it shares waters with Britain. Another update suggests that London made new demands on fish, not France. It is hard to know which such “behind the scenes” report is correct.

The second sensitive issue is a level-playing field or competition rules. Over the weekend, The Times reported that French President Emmanuel Macron and German Chancellor Angela Merkel agreed to soften EU demands on the topic.

Perhaps the third issue is the hardest to resolve – governance. Brussels’ level of distrust in Johnson rose after the PM introduced the Internal Markets Bill a few months ago. The legislation knowingly violates the Withdrawal Agreement that he signed last year. Amid suspicions, member states demand more assurances that a deal would be enforced.

Both sides prefer a deal over no deal, especially as the pandemic continues weighing on the economies on both sides of the English Channel. Is it enough for compromises at the last moment? The answer depends on the definition of “the last moment.” Perhaps an accord is unachievable on Monday but could be reached on Thursday and on Friday when EU leaders convene virtually.

1 2
View single page >> |

Disclaimer: Foreign exchange (Forex) trading carries a high level of risk and may not be suitable for all investors. The risk grows as the leverage is higher. Investment objectives, risk ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.