GBP/USD Drops with Brexit Talks Close to Breaking Down

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GBP/USD Analysis and Talking Points

  • GBP/USD Faces Reality as Talks Risk Breaking Down
  • What Next? Q4 Snap Election

GBP/USD Faces Reality as Talks Risk Breaking Down

Brexit talks are at risking of breaking down after Chancellor Merkel stated that there could only be a Brexit deal if Northern Ireland were to stay in the customs union, adding that if this were not to be the case, then a deal is “overwhelmingly unlikely”. Of note, PM Johnson’s Brexit plan is to take the UK and NI out of the customs union and as such with the EU sticking to this demand of keeping NI in the customs union, the likelihood of a deal is increasingly unlikely. In reaction to this, the Pound is the worse performer across major pairs with GBP/USD heading towards 1.2200, while GBP/JPY has broken below 131.00, in which a pullback in equity markets has also pressured GBP/JPY further.

What Next? Q4 Snap Election

Given the significant differences between the UK and EU, it is becoming increasingly likely that a snap election will take place before any Brexit, in which an extension to Article 50 will be provided in order to pave the way for a general election.

Q4 GBP Fundamental Teaser

GBP/USD Price Chart: Daily Timeframe (Feb 2019 – Oct 2019)

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX

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