GBP/USD plunges in the face of rising risk of Hard Brexit, EUR/USD remains strong

The GBP/USD increases significantly its correction on Tuesday, and has now erased most of the gains recorded last week in the face of the victory of the Conservatives in the uk elections.

Recall that faced with the prospect of seeing the agreement of Brexit Boris Johnson validated by a Parliament which will now be favorable, the Book had exploded to the upside last week, coming to test the psychological threshold key to 1.35 shortly after the first polls to exit polls.

After a phase of euphoria, the GBP/USD had, however, started to correct, investors are realizing that uncertainty is going to replace another, because once the Brexit validated, the negotiations on future trade relations between the EU and the Great Britain will begin.

It is precisely this topic that comes to heavily weigh on the Pound this morning, with a break below the psychological level of 1.32 GBP/USD, as the pair was on 1.33 the first light of day.

According to information from the press, the british government would in effect render illegal the extension of the transition period, post-Brexit, leaving little time to conclude a trade agreement with the EU.

The local media have reported early Tuesday that Johnson will add a revision to the bill of Brexit, which would exclude explicitly any extension of the transition period after December 2020. The Uk must leave the EU by January 31, 2020.

The reports have raised concerns about the fact that the new government of the United Kingdom could lead the country towards Brexit “hard” if the trade negotiations with the EU are not going well. If the bill were implemented, it would be the final 11 months prior to the conclusion of a trade agreement, which, in the opinion of many observers, is not long enough.

In the end, this is not because an agreement of Brexit will undoubtedly be quickly approved by the british Parliament that a “Hard Brexit” becomes impossible, and the negotiation period will be short, the greater the chances of lack of agreement will be high, and it is this that the market punishes this Tuesday.

Interestingly, it should be noted that the Euro does not seems to by affected by this perspective, while the single currency was, however, very widely taken advantage of the favourable outcome of the elections in the UK last week, although a lot less than the GBP.

The pair EUR/USD stabilizes in effect just under 1.1150 this Tuesday, maintaining the overall profile uptrend, but hesitant to launch an assault on the heights of last week to 1.12.

Finally, it should be noted that both the GBP/USD that the EUR/USD could be influenced by the economic calendar US of the day, several important events are expected.

Traders will monitor the effect of building permits and housing starts at 14: 30, industrial production at 15: 15, and the report JOLTS on the jobs at 16h.

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