During Friday’s European trading session, new news came out of the Brexit trade talks, with EU officials saying that the UK trade deal is “close to being concluded” and is expected to be concluded by the end of the week unless negotiations break down at the last minute. In addition, EU27 leaders may meet again on Brexit issues after the December 10-11 summit.
The GBP/USD then pulled up 40 pips in the short term, but quickly fell back. With Brexit trade talks entering their final stages, GBP volatility has spiked recently, with implied volatility rising to a one-week high of 13.5% since March.
On Thursday, negotiators from both the U.K. and the European Union talked late into the night in an attempt to reach a post-Brexit trade deal. The EU’s chief Brexit negotiator, Barnier, will conclude trade talks in London on Friday morning local time and return to Brussels, where diplomats said the outlines of an agreement could come out in the next 48 hours.
Barnier, who has been in London for a week, is considering hitting the road Friday to consult with European Commission President von der Leyen and the ambassadors of the EU’s 27 member states on the final terms of the agreement, according to sources. Sources said the final itinerary has yet to be determined and that Barnier could postpone his return until Saturday if talks progress.
Even at the last minute, EU member states have no way of demanding it. For example, French European Affairs Minister Clement Beaune said Friday that France would exercise its veto if the EU’s trade deal with Britain is not in its interests.
Beaune said in an interview with European Radio 1.
“If the agreement is not good, then we will oppose it, and that has always been our position.”
France is concerned about last-minute EU concessions on fishing rights in British waters and about British companies gaining an unfair competitive advantage. Earlier, the French envoy had warned the EU’s chief negotiator, Barnier, not to compromise too much in order to reach a deal.
Judging by the performance of the British pound, traders would be wise to proceed with caution until the dust settles on the final outcome. Any news of Brexit-related trade talks may cause the pound to jump up and down, and it is not advisable to enter the market during these times of short-term volatility.
From a technical point of view, analysts at Forexlive believe that the GBP/USD has already broken through the September 1 high of 1.3483 (also this year’s high) and above that the 2019 high of 1.3514. This area is a clear resistance target, and the GBP/USD needs to break through it to continue to move higher. Current support is at 1.3440 and a break below this level would weaken the grip on the buyers’ side.
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