GBP/USD – Closing in on 1.30

UK Brexit gamble weighing on the pound

The pound is once again coming under pressure on Tuesday as no-deal Brexit comes back to the forefront of traders minds.

New government legislation is believed to undermine parts of the Withdrawal agreement in relation to Northern Ireland, which threatens to frustrate the process even further at a time when compromise is required.

With just over a month to go until the European Council summit, by which time both sides agree a deal will need to have been struck, both sides are ramping up pressure on the other to compromise on core issues and this may well be another example of that. Of course, it’s a risky game undermining your own trustworthiness at a time when you’re trying to sign a trade deal.

Whether this kind of gamble could be a deal breaker or not, traders are likely to continue to be very sensitive to anything that jeapardises an agreement and leaves the UK facing a global pandemic, high unemployment and no-deal all at the same time. Especially against the dollar which is breaking out of its downtrend and eyeing a correction of its own.

The pound is now closing in on the psychologically significant 1.30 level against the US dollar, having already fallen around 3.5% in the last week. It may run into some support here, having done so multiple times in August but it will remain extremely vulnerable going into such a risky uncertain period. To the upside, 1.32 looks key having been notable resistance back in early August.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam