Home
- After the November 25 Brexit summit sealed the Brexit deal, volatility on GBP/USD remained capped by 1.2725-1.2865.
- In her effort to have the Brexit deal passed in the UK parliament the UK Prime Minister Theresa May has no clear majority of MPs for December 11 vote.
- The Bank of England said that disorderly Brexit would lower UK’s GDP by almost 8% and send Sterling lower by 25%.
- With the economic indicators playing a secondary role in Brexit saga the US trade relations with China and US non-farm payroll may decide Sterling’s value.
- The analysts expects GBP/USD to remain bearish only in short-term leaving 1-month and 3-months forecast bullish.
The GBP/USD opened trading during the final week on November at 1.2796, little boosted by the Brexit summit from Sunday, November 25 sealing the Brexit deal between the European Union and the UK. After hovering around 1.2800, the GBP/USD fell towards the weekly low of 1.2725 by the end of the week as prospects darkened for the US President Trump making a trade deal with China’s counterpart Xi during the G-20 summit in Buenos Aires over the first weekend of December.
Sterling initially benefitted from the news of the UK Prime Minister Theresa May getting the Brexit deal approved by the European Council, but pessimism started to rule the FX market soon after as deeply divided UK parliament did not appear to be even close to passing the Brexit deal. Theresa May will need 320 members of the UK parliament (MPs) voting for her Brexit deal with only 224 loyal Conservatives being secured now.
The Bank of England also jumped into the drama saying disorderly Brexit may cause the UK GDP to fall 7.7% and Sterling to depreciate by up to 25%. No-deal scenario, although not being expected by the Bank, would throw the UK economy and its currency into disarray. The Bank of England painting a dark picture of the UK economic future with no Brexit deal, the GBP/USD fell to last week’s low of 1.2725.
With no economic data due in the final week of November, it was the Brexit headlines that influence the FX market with GBP/USD capped within the tight range of 1.2725-1.2865.
The FOMC meeting minutes disclosed that the monetary policy statement in coming meetings might need changes, particularly in language regarding the need for “further gradual increases” in rates. That is slightly US dollar negative as markets need to discount the chances of a fewer rate hike next year, but the key to the overall sentiment is held by the US President Trump and his will to negotiate a trade deal with China on the upcoming G-20 meeting in Buenos Aires over the weekend.
The first week of December will see only marginal data on the UK manufacturing, construction, and services PMIs due, while the US marker calendar is featuring a heavyweight US NFP report next Friday. The spotlight will be on Brexit headlines as the parliamentary debate on Brexit deal starts next Thursday, December 5 before voting on the deal on December 11
