UK and EU Restart Face-to-Face Meetings, British Pound Remains Steady
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- Timing is running out for Brexit
- Uncertainty looms on the British political horizon
The Great British pound is trading relatively steadily as the UK and the EU are set to restart face-to-face Brexit talks. This will happen this weekend after key officials had previously been forced to quarantine. Chief EU negotiator Michel Barnier is expected to update diplomat and fisheries ministers on the state of negotiations. He is likely to inform them that little progress has been made over the last week.
Traders and investors have been holding their breath for a very long time in anticipation of a Brexit deal. Now that time is extremely limited, the two sides are back at the negotiation table as Mr. Barnier is heading to London Friday evening. Earlier this week, the Chief EU negotiator commented that the same divergences remain.
The Market’s Reaction
The market hasn’t received any concrete results or agreements for quite a while. However, market participants have favored the British pound as it has appreciated by over 5.50% against the US dollar for the last 30 days. The market appears to have priced in a fairly thin deal between the sides which covers some sectors in manufacturing, while the talks on industries within the services sector might extend further. The time to reach an agreement is running short as the deal needs to be ratified by the EU Parliament by mid-December.
Clouds on the Horizon for the UK
The UK’s political horizon for the new year is still looking cloudy and uncertain. PM Boris Johnson’s popularity is declining given the numerous U-turns in British policymaking throughout summer and autumn. The UK officials responded to the pandemic by introducing various measures. How Boris Johnson performs as the holiday season approaches is going to be crucial as the UK is under a lockdown until Dec 2. After that, there will be different tiers of Covid-19 restrictions placed by local authorities across England. The topics of most interest are how the rollout of the vaccine is going to take place and how the economy is going to react. All of these questions pose heightened uncertainty for the sterling’s outlook in the near to mid-term scenario.
How is the GBP/USD Pair Faring?
On the technical front, the GBPUSD pair is close to reaching a triple top at the levels around 1.3450 to 1.3500. Since December 2019, the pair has tried twice to go over that resistance level. Across the board, the sterling is trading mixed as it’s showing losses against the Australian dollar and the New Zealand dollar. The two heavily volatile pairs have been trading to the downside since the pandemic lows in March.
The GBPCAD pair is trading relatively unchanged for 2020. The exchange rate has been in consolidation in the range of 1.7500 to 1.6800. The GBPCHF pair is showing a similar trading pattern. It has also been consolidated since April in the region of 1.2200 to 1.1650. The GBPJPY rate is showing upward momentum in the last two months. It climbed over 4.30% to the current market price of 138.60. The pair has been forming an uptrend since March when the exchange rate slipped to 124.00. Since then, the GBPJPY has recovered by over 12% to current price levels.