- GBP/USD Trading remains stagnant almost one-week later
- Further rocky road ahead as tough negotiations expected
- Lowest point of year to date reached with further expected
After a long, contentious period of wrangling, Britain finally exited the European Union on January 31st at 11pm. This brought the curtain down on 47 years of membership with promises of forward movement from UK leader Boris Johnson. Negotiations are now set to begin on how the post-Brexit era will play out in many important areas including trade and freedom of movement. This has not gone unnoticed within the market, the GBP/USD market falling below the significant psychological benchmark of 1.30.
No significant progress since exit
As we set up for the beginning of talks on how the post-Brexit reality will look, and be implemented from all sides, there has been a lot of conjecture. This has certainly not provided any solid direction for the market as both sides look to impose their will on how the future landscape will look.
It is undoubted that the lack of positive progress in the market will also have been greatly hampered by the widespread Coronavirus outbreak. As this continues to spread, markets around the world, particularly in Asia, have been in panic mode. With China being one of the dominant powers in world economic terms, this has certainly had a domino effect. With that said, plans to introduce a stimulus from the Chinese government have worked to steady the ship a certain amount.
Tough negotiations likely to take time
From their publicly stated positions, it would appear that UK PM Johnson, and EU Chief Negotiator Michel Barnier are still some distance apart in their view of how a Britain – EU relationship is going to look. In reality, these talks taking place over the next several months until December will hold the key in shaping the future landscape.
Boris Johnson though remains steadfast in his belief that the UK will not be following the rules of the EU when it comes to trade agreements and has proposed a “Canada style” free-trade agreement with the bloc. The EU on the other hand have referred to this as “ambitious”, and also commented on the need for a “level playing field”. All of this points to a difficult negotiation period ahead and possibly turbulent time for the GBP throughout, particularly if little compromise can be found.
Forex market somewhat bearish moving into the weekend
As we complete the first full Brexit week and move into the weekend, GBP/USD markets remain low. They have reached their lowest point of the year to date and lowest since Christmas Eve.
Traders will be hoping that Monday brings some more positive news on the geopolitical front, though that seems unlikely with the China virus crisis rumbling on and the UK seemingly in no mood to budge from its view on EU trade and relations moving forward.