GBP Vulnerable as Brexit Saga Drags on
GBP was under serious pressure today, all but wiping out the gains it made yesterday, amid a risk averse market tone (which tends to hurt GBP) and continued pessimism over the state of EU/UK Brexit negotiations.
As a reminder, just yesterday, GBP was buoyed on reports that the EU was preparing to soften its stance on the issue of fisheries. This raised hopes that the two sides will be able to thrash out a deal (if one compromises, the other becomes more likely to do so).
But UK Brexit Negotiator Frost did not come across as optimistic that a deal could be made in the near future today.
As such, Cable (GBPUSD) was knocked back below its 21 and 50 DMAs (1.2312 and 1.2289 respectively) to the low 1.22s.
Frost said there remains a fundamental disagreement with the EU on most aspects of the level playing field.
Moreover, when asked about a potential deal on fisheries, he said "I'm beginning to think we might not make it by the 30th of June".
This is the defacto deadline by which time an extension to the transition period (which ends at the end of 2020) must be agreed, a date by which the UK has said it wants to assess how the talks are going.
On the topic of an extension to the transition period, UK PM Johnson said there is no change to the government's transition period stance (i.e. they will not accept one).
GBP bulls will be crossing their fingers for this rumoured EU concession on fisheries to come soon, as it seems the only ray of hope for a successful outcome in UK/EU talks at the moment.
Even with a deal on fisheries, issues such as EU level playing field demands continue to stall talks.
As we at Freak Network have said many times, we continue to see growing downside risk and volatility for GBP as we head towards the end-of-June deadline to agree on an extension.
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