Brexit strikes GBP

Financial and commodity markets analytics

Market Watch review. 11.09.2020

In today's release, we’ll cover the following topics:

  • Difficult negotiations between Britain and the EU.
  • The ECB plays a double game.
  • US inflation report.
  • Analysis of a GBP/USD sell deal.

The current week ends with unexpectedly very strong weakening of the GBP. Brexit remains the main bearish fundamental factor, or rather the risk of a breakdown of this deal. We repeatedly hear from EU representatives about Britain's unwillingness to compromise, thereby increasing the likelihood of Britain leaving the EU without a deal, which is extremely negative for both the European Union and foggy Albion.

During the first four trading sessions for the current week, the GBP/USD currency pair fell by almost 500 points. I would like to draw your attention to the significant growth of the EUR / GBP currency pair, which confirms the fact of the rapid weakening of the British currency. Which may continue if there is no progress in the Brexit negotiations.

And now let's move on to no less interesting, complex and, in a sense, confusing position of ECB. Let me remind you that last week, for the first time in the ECB, they started talking about an uncomfortably strong EUR, which led to a decline in the EUR/USD pair from the highs reached above 1.2000. During a press conference yesterday, Christine Lagarde spoke quite optimistically about the prospects for the currency bloc and the success of the ECB's monetary policy, thereby providing significant support to the EUR.

But today, the chief economist of the European Central Bank again says that an increase in the euro exchange rate worsens the prospects for inflation, thereby increasing uncertainty. As a result, we are witnessing the consolidation of the EUR / USD quotes in a fairly wide sideways range of 1.1750 - 1.1900 with periodic false breakouts of the boundaries of this channel. Therefore, it is extremely difficult to determine the further direction of the price movement.

Moving to the American trading session, I would like to note the forthcoming publication of the US inflation report. Let me remind you that a moderately negative report on the change in the number of applications for unemployment benefits was published yesterday, so weak inflation data may increase pressure on stock indices, thereby contributing to the strengthening of the US dollar.

I will conclude today's review by analyzing the GBP/USD sell deal. The deal was opened at 1.3020, a Stop Loss order was placed at 1.3055, and a Take Profit order was placed at the closest strong support level of 1.2890. The profit on this trade was $ 1,300, while the risk was only $ 350.

Closely monitor the news background and be prepared for all the surprises of the market.