By David Wagner
The pair GBP/USD is in a free fall since the beginning of the week, with an opening gap downward as early as Sunday evening.
The day yesterday was then the occasion of an exceptional tumble, between a peak day at 1.3165 and a low of 1.2983 yesterday evening. The pair was then able to climb back above the psychological threshold key 1.30, but the decline has resumed in most beautiful Tuesday morning, the pair dropped to a new low annual 1.2940.
As it was already the case for the dive yesterday, the weakness of the Pound is due to concerns about the negotiations post-Brexit, as a result of conflicting messages about this.
The trade negotiations UK-EU promise to be evil
Michel Barnier, the chief negotiator of the EU for the treaty of Brexit, and Boris Johnson, the british prime minister, have presented the two positions are very different and almost opposite to the approach of negotiations on the future trade relations.
As regards alignment with EU rules, the EC argues that it will be linked to market access in order to ensure fair conditions of competition. As for the Uk, he says that it is not necessary that an agreement implies acceptance of the rules of the EU, and that any relationship must be on an equal footing.
On the question of Gibraltar, the EC said that the trade agreement will not apply to Gibraltar because it continues to support Spain on this point. In the meantime, the United Kingdom declares that it will negotiate on behalf of the family british, “which includes Gibraltar”.
As regards the dispute settlement mechanism, the EC declares that any decision of this type will require that the ECJ is competent to settle these commercial disputes. In the meantime, the United Kingdom said that he wants a system that is flexible and non-intrusive, but “without the jurisdiction of the ECJ”.
In regard to fisheries, the EC argues that any trade agreement requires that fishing be also part of the agreement. The United Kingdom says that this is not necessarily the case, although it notes that it is willing to consider such an agreement.
For the most part, these differences of opinion continue to show that the two parties derive from two different angles, so that they hit the chest before entering the ring. Both want to show that they are “winners” in this battle and that they are strong enough to not to make concessions, suggesting to the market that the two parties will find it difficult to find agreement in the short time limit (up to the end of the year).
Finally, as regards the thresholds to be monitored on the GBP/USD, we can consider the area of 1.2950 as an immediate support, while on the rise, the psychological threshold key 1.30 and the peak of the last night at 1.3023 will be the first resistance potential to monitor.