Trend of Sterling During the Key Period of UK-EU Negotiations

After the EU‘s chief negotiator Michel Barnier had a 12-hour tunnel talk with the UK last Friday, British Prime Minister Boris Johnson’s official spokesman stated that although some progresses had been made, it is a pity that both sides did not reach an agreement due to some divergences. The EU hoped that the UK can make more concessions to reach the trade agreement that has been discussed for a long time.To get more news about WikiFX, you can visit wikifx official website.
　　The financial market seems to believe that both sides will reach an agreement, which brought a continuous rebound sterling. Hence, GBP/USD rallied to 1.3049 from 1.2675 recorded on September 23th, showing no worry about the UKs hard brexit in the financial market. Johnson said last week that according to an ultimatum, if the agreements are not likely to be reached before October 15th, the UK will terminate the negotiation completely and plan to brexit without trade agreements.

It is believed that the EU will file a suit against the UK on its internal market bill, so more attention should be paid in the next few days. And sterling is supported by the easing atmosphere in the negotiation. If sterling keeps rebounding, there would be a dramatic turning point that the final trading agreement is signed between the UK and EU. However, be careful that the good news may bring more attention in addition to some risks. The latest economic data released by the UK seems very bad, and its future data is expected to be worse due to the second round of COVID-19 outbreak.
　　Therefore, the Bank of England is more likely to impose negative interest rates or strong quantitative easing. It is estimated that some senior traders will seize the chance to sell in the market, and sterling may drop from a high level under the pressure. If the good news comes, sterling may challenge the upward resistance level of 1.3186-1.3267. So investors should be careful about buying at the level area. Meanwhile, sterling is set to fall to the level of 1.28 due to the possible hype based on the negative news in the market.