Tuesday, November 24

GBP/USD eyes 1.3200 mark following reports Brexit deal could be 10 days away

  • GBP/USD put in a strong performance into the weekend close, rallying over 80 pips or more than 0.6%.
  • News that UK PM Johnson’s Eurosceptic advisor Cummings had resigned early and positive Brexit updates helped.

GBP/USD trades just below the psychological 1.3200 level heading into the weekend close, with the pair having gained 80 pips today, or moving more than 0.6% higher.

GBP boosted by Cummings resignation and Brexit latest

GBP got a boost on Friday evening on the news that UK PM Johnson’s special advisor and arch-Brexiteer Dominic Cummings had decided to resign from government service immediately, rather than continuing until Christmas, as had been initially expected.

This news was taken as a positive for GBP given the assumption that Cummings’ exit from the folds of top-level UK government decision making improves the chances that the EU and UK will be able to agree on a free trade deal to replace the current arrangement at the end of the year. Note: Cummings is widely seen as the brains behind the Leave campaign that successfully campaigned for Brexit in the run-up to the 2016 referendum and is an arch-Eurosceptic who has urged takes a hard-line in negotiations.

However, somewhat conflicting the above news and despite Cummings being seen leaving No.10 Downing Street holding a box (seemingly containing the contents of his desk), the UK government released a statement saying that Cummings would continue working for the UK PM until mid-December.

Elsewhere, GBP was also helped on Friday evening by the latest Brexit news; the Telegraph was reportedly told by a Senior Member of the European Parliament (MEP) that a Brexit deal “could” be agreed upon in as little as 10 days. Moreover, the MEP also reportedly said that the European Parliament had informed EU Chief Brexit Negotiator Michelle Barnier that the “latest” they could get any negotiated deal would be the 10 December, implying this would be the latest date by which the European Parliament could start working on ratifying a Brexit deal on time for the end of the transition period on the 31 December.

Whether or not this means a deal will actually be agreed upon within 10 days or not remains to be seen (emphasis on the word “could”!). All other indications this week suggested that very little progress was made by the EU and UK towards a deal. However, 10 December should now be noted as an unofficial deadline for the EU Parliament to be able to get any negotiated deal passed into law.

GBP/USD eyes 1.3200 mark

Given the above news, GBP/USD has been on the front foot in recent trade but has been unable to break back above the 1.3200 level. The pair currently sits somewhere in the middle of a recent upwards trend channel, the upper bound of which links the 16 September, 21 October and 11 November highs (at roughly the 1.3000, 1.3160 and 1.3300 levels respectively) and the lower bound of which connects the September and late-October/early-November lows (at roughly the 1.2700 and 1.2900 levels respectively).

Thus, from a technical standpoint, GBP/USD bullish bias is maintained, which ought to be supported by the fundamentals as long as markets expect the EU and UK to eventually agree on a trade deal for 2021 and beyond.

Credit: FX Street

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