Trend of Sterling During the Key Period of UK-EU Negotiations
After
the EU‘s chief negotiator Michel Barnier had a 12-hour tunnel talk with
the UK last Friday, British Prime Minister Boris Johnson’s official
spokesman stated that although some progresses had been made, it is a
pity that both sides did not reach an agreement due to some divergences.
The EU hoped that the UK can make more concessions to reach the trade
agreement that has been discussed for a long time.To get more news about
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The financial market seems to believe that both sides will reach an
agreement, which brought a continuous rebound sterling. Hence, GBP/USD
rallied to 1.3049 from 1.2675 recorded on September 23th, showing no
worry about the UKs hard brexit in the financial market. Johnson said
last week that according to an ultimatum, if the agreements are not
likely to be reached before October 15th, the UK will terminate the
negotiation completely and plan to brexit without trade agreements.
It is believed that the EU will file a suit against the UK on its
internal market bill, so more attention should be paid in the next few
days. And sterling is supported by the easing atmosphere in the
negotiation. If sterling keeps rebounding, there would be a dramatic
turning point that the final trading agreement is signed between the UK
and EU. However, be careful that the good news may bring more attention
in addition to some risks. The latest economic data released by the UK
seems very bad, and its future data is expected to be worse due to the
second round of COVID-19 outbreak.
Therefore, the Bank of England
is more likely to impose negative interest rates or strong quantitative
easing. It is estimated that some senior traders will seize the chance
to sell in the market, and sterling may drop from a high level under the
pressure. If the good news comes, sterling may challenge the upward
resistance level of 1.3186-1.3267. So investors should be careful about
buying at the level area. Meanwhile, sterling is set to fall to the
level of 1.28 due to the possible hype based on the negative news in the
market.
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