Search ForexCrunch
  • Amid a lack of pertinent news flow ahead of the weekend, GBP/USD is consolidating close to 1.3500.
  • UK sources being cited by RTE said that Brexit talks will continue over the weekend.

GBP/USD is consolidating close to the 1.3500 level as trade volumes thin ahead of the weekend. On the day, the pair is 0.7% or around 90 pips lower, with the GBP still the worst performing G10 currency.

Brexit update

Not much has changed on the Brexit front over the last few hours and markets. UK sources speaking to RTE said that talks will continue over the weekend (as expected), but it remains clear that the two sides still remain some way apart. The European Parliament had set the negotiators a hard deadline to bring them a deal to scrutinise by Sunday, or else they would not have enough time to get it ratified prior to the end of the year, but reports on Friday suggested that European leaders can (initially at least) bypass the European parliament in order to quickly ratify any deal in time for the end of the year, seemingly removing the importance of the Sunday deadline.

Thus, the Brexit saga continues, and the GBPUSD rollercoaster with it. As market conditions thin next week with many European and North American participants on their Christmas holidays, Brexit-related GBP moves could perhaps become even more volatile.

USD perks up

After four straight days of selling that took the Dollar Index (DXY) from starting the week just under 91.00 and hitting lows of the week in the 89.70s, the US dollar is finally finding some respite into the weekend and DXY has managed to clamber back above the 90.00 level (just). Where USD goes at the start of next week likely have most to do with how Brexit negotiation go over the weekend, with any breakthrough likely to propel GBP/USD back towards 1.3600 and send DXY crashing back below 90.00, while if negotiations are looking shakey, this could support a gradual DXY recovery back towards 90.50.

Beware that traders might jump on such a rally as a great opportunity to get short, however, as risk appetite grows into the year-end as the US Congress approaches a deal o further fiscal stimulus, the vaccine news continues to look good and the Fed stands by its ultra-accommodative stance.