Over the course of yesterday’s London trading session, the pound pushed up to the top of its current trading ranges of around the 1.1510 mark on GBP/EUR and 1.2480 on GBP/USD. Unfortunately for sterling holders, these key levels have been tested already this month, with both selling back down to their respective range lows at the time, as mentioned in “Sterling returns to ranges” a few weeks back.
With EU free trade fears once again coming to the forefront, there is seemingly little enthusiasm on the surface to push the pound up and above these technical levels. Additionally, with a clutch of European countries phasing out lockdown giving some support to the euro, GBP/EUR, in particular, could begin to find itself in hot water. The key issue that is beginning to rattle some in the pound markets, is the notion that the UK could sleepwalk into a no-deal Brexit scenario, as despite the impact of coronavirus, the Government has steadfastly refused to extend the negotiation period and the June 30th deadline is fast-approaching, If the Government make this presumption a reality, things could get very bouncy for sterling very quickly.
The anxiety for sterling now is surrounding two key points: lifting of lockdown, as mentioned in yesterday’s article, and the June 30th deadline for an extension to the Brexit process. The double-whammy of Brexit fear, as well as lockdown in comparison to most other currencies, means that being range-bound is probably the best sterling can hope for at the moment – all eyes will be back on Johnson now he is back in the driving seat, any announcement on Brexit over coronavirus will likely be scrutinised more heavily by the market.
Have a great day,
Author: Joshua Haden-Jones, Senior Relationship Manager
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