GBP : Brexit News Flooding The Scenery

(Mon, 5 Oct 2020). UK PM Boris Johnson and European Commission President Ursula von der Leyen spoke over the weekend in an effort to push trade negotiations forward. UK PM Johnson said that a deal is there to be done but warned that if the two sides failed to reach an agreement, the UK can more than live with trading on WTO terms. The two leaders are now expected to talk on a regular basis to keep the talks moving forward. The UK reiterated that it needs to see progress by October 15 on whether a deal is possible, while the European Council meeting on October 15-16 will ‘ take stock of the implementation of the withdrawal agreement and review the state of the negotiations on the future EU-UK partnership. Leaders will discuss preparatory work for all scenarios after 1 January 2021’. If sufficient movement has been made, and common ground identified, then negotiators will have until early-November to get a deal agreed.

Sterling continues to trade with a small amount of Brexit optimism priced-in, a set-up noted by investment bank Goldman Sachs in their latest Sterling outlook. The bank said that while a breakdown of talks cannot be ruled out, their core view is of a bare-bones EU/UK trade deal to be agreed by early November.

GBP/USD is clinging on to support at 1.2900 for now and needs to break above a cluster of recent highs all the way up to 1.3008 to regain a positive set-up. The pair are currently using the 20-dma (1.2860) as support. While the market is currently favoring further gains, it may be wise to sit on the sidelines until the trade talks play out.

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