Home GBP/USD bulls back in the driving seat on positive Brexit vibes
FXStreet News

GBP/USD bulls back in the driving seat on positive Brexit vibes

  • GBP/USD breaking higher as positive Brexit vibes keep hopes alive. 
  • Bulls taking advantage of a weakening USD outlook.

GBP/USD is currently trading at 1.2534 and has rallied some 0.4% on the day having travelled from a low of 1.2478 to a high of 1.2575. The US dollar is still under pressure and printed a fresh low of 97.43 in the DXY today. While the dollar is certainly a major factor, the fact that the pound has also rallied vs other currencies is testament to renewed optimism in Brexit developments and a re-emergence from the bulls.

 The Times recently reported that according to, Brussels sources, the UK is expected to signal compromises on fisheries and a “level playing field” trade rules if the EU backs down on its demands for regulatory alignment and fishing access.

If a bare bones of a trade deal can be put in place this week, it would provide significant relief for the pound. That said, any rally could prove to be short-lived if any trade deal is deemed to be lacking the components of a ‘good deal’ for the UK,

analysts at Rabobank explained. 

It would, therefore, appear we are back to GBP volatility all the while the headlines are going to change from pessimism to optimism. However, so long as positive Brexit progress keeps course, as the analysts suggest, it could be blue skies for the pound. According to the Times, the analysts noted that ‘Frost is keen to counter the perception that talks are deadlocked and a that a free trade deal with the EU cannot be done. The paper also reports that Barnier has commented to European ambassadors that he believes that the UK government wants progress over the next few weeks.

We are waiting for a statement at the end of this week for near term guidance, but there is a long road ahead of the market in terms of the end of June deadline for an extension to the transition phase. PM Johnson & co have been quite clear from the start that there are no intentions of requesting a new deadline. frost reiterated recently, in fact, and stated that it would not agree to one of the EU were to make such a request.

Negative rates are a real threat

Meanwhile, it is worth noting that the Net short GBP position moved back to December levels, for Brexit is not the only negative input in the market which is concerning to traders. There has been much criticism as to the UK government’s handling of the coronavirus crisis. Also, negative rates are a real threat to sterling markets.

Comments from BoE Governor Bailey and other MPC members that negative rates have not been ruled out have also been GBP negative, though this is unlikely to be an imminent policy option, 

analysts at Rabobank argued. 

GBP/USD levels

 

FX Street

FX Street

FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions.