Brexit Outlook and British Pound (GBP / USD) Price Analysis and Chart:
- An agreement must be reached by Sunday according to both parties.
- The pound sterling remains at risk.
Last night’s meeting between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen failed to break the current stalemate in EU / UK trade talks and both sides agreed that the agreement, or the form of an agreement, should be reached by Sunday. The three main areas of contention, fisheries, future governance and a level playing field remain. According to sources, talks will continue between the two negotiating teams and the two sides agreed that Sunday “a firm decision should be taken on the future of the negotiations”.
As with all EU / UK deadlines, there is always the possibility that this will be pushed back later – as neither side wants to be seen as the one walking away from the talks – but within three weeks, Sunday can eh well be the last day of four torturous years of discussions.
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Earlier today, the Office for National Statistics released the latest UK growth data for October. Three-month average growth rose 10.2% from 10.1% forecast and at an earlier reading of 15.1%, YoY GDP contracted 8.2%, slightly better than the forecast of -8.3% and an earlier reading of -8.4%. Industrial and manufacturing data also beat expectations and numbers for September.
GBP / USD remains limited for now, seemingly erasing the latest setback. The recent gentle uptrend has stopped and the Cable is trading in an approximate range of 1.3225-1.3540 with moves becoming more volatile this week. The 14-day ATR is around 108 pips and hits a new one-month high, while Cable is now back below the recently favorable 20-day simple moving average. If Sunday is the last day of talks between the EU and the UK, Monday morning price action is likely to be extremely volatile. It may be wiser to enter this high risk event without any position in sterling.
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GBP / USD Daily Price Chart (April – December 10, 2020)
Switch | Long | Shorts | OI |
| Daily | -8% | -1% | -4% |
| Weekly | -33% | 21% | -6% |
Viewing IG Customer Sentiment Data 37.03% of traders are net long with a short / long ratio of 1.70 to 1.We generally take a vexing view of crowd sentiment, and the fact that traders are net-short suggests that GBP / USD prices may continue to rise.Traders are even sharper than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP / USD contrarian bullish trading bias.
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