British Pound Remain On Edge as the UK/EU Talks Continue

GBP In Need of A New Driver

With the extension of Brexit, the transition time is currently off the table, the UK and the EU must have to try a way to re-double their efforts in a bid to find a common ground on the new trade deal. If the terms are changed, and the two opposing sides will have to trade in the WTO terms from the period starting 1st January 2021. The two sides are still hoping for a new deal to be struck, but neither of the two has set up the budget from the starting position, leaving the deal still quite pretty in doubt. The latest economic data that was released from the Eurozone and the UK has picked up, but from a lowly base, as COVID-19 virus continues to shut down these economic activities. This is because such deals should be made pretty quickly.

Both sides are hoping that they will strike a deal, yet none of them is yet to budget from the starting position, which is the reason why the deal is still not closed. The latest economic data that was released by the Eurozone and the UK has completely picked up, but from the lowly base, as the coronavirus pandemic continues to cause a decline in all major economic activities. This is because this type a deal ought to be closed quickly.

The GBP continues staying in the middle of the 2nd quarter trading between 1.2070 and 1.2815 and needs a driver to break either. Any positive talks of such a deal, even those that are bare-boned will see the USD/GBP move towards the final quarter high whilst additional disappointment will heavily weigh on the pair. As indicated by the Bullish correction on the EUR/GBP.

GBP/USD Weekly Chart (May 2017 – July 2020)

The GBP/EUR currency pair that expresses the Euro value with regard to the GBP represents the pathway through which traders can easily express their views for relative potentials of the economies of the UK and Europe. Essentially, the FX traders are not just trading the future realities, but also the perceptions of the current unverifiable realities.

Early this year, back in March 2020, we found the GBP/EUR breach the top of the current trading range that uses biweekly candlesticks. With the 0.9324 levels that were previously found back in late 2019, has been breached in the year 2020, as the capital repatriation around the world with regard to the collapsing risk sentiments that values the euros spiking.

Because the pair has already breached the height of the trading range, we may start viewing the potential for the fall in the GBP/EUR as the pair has completed back in the range. Nevertheless, if the chart is updated to include this 10-year bond yield that is spread (between German bond produces and the UK gilt yields), we can find that this bond market is highly evident supporting GBP/EUR.

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