wisepowder: Trend of Sterling During the Key Period of UK-EU Negotiations

Trend of Sterling During the Key Period of UK-EU Negotiations

7 May 2021 at 03:21

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 WikiFX, you can visit wikifx.com official website.


  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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