GBP/USD suffers worst weekly slide in years despite UK Parliament’s Brexit vote
|- The pound was among the worst performers in the currency market over the week.
- The return of hard Brexit fears and profit-taking behavior weakened GBP.
The GBP/USD lost more than 300 pips during the week, making a sharp reversal from 19-month highs it reached above 1.3500 a week ago following the general election. The decline found support near 1.3000 and then rebounded modestly, being unable to surpass 1.3050.
Traders likely took profit after a significant advance in the pound before and immediately after the general election in the United Kingdom. The move lower was also aggravated amid concerns of a hard Brexit following Prime Minister Boris Johnson's decision to rule out the possibility of extending the transition period beyond December 2020.
On Friday, the new Parliament voted to back Johnson’s Brexit deal. The bill goes for another vote in the House of Commons. It is expected to pass easily. The move was already priced in and markets ignored the vote.
Also on Friday, it was announced that Andrew Bailey will replace Mark Carney in March as Bank of England’s governor.
A quiet week ahead
Trading volume is likely to be low next week amid holidays. The economic calendar shows a few releases. On Monday in the US, the Durable Goods Order report is due. Trump’s impeachment and the negotiations between the US and China could dominate headlines.
“In the UK, focus is on the Brexit process but given PM Boris Johnson’s large majority, it seems that nothing can prevent the UK from leaving the EU by 31 January. Focus is set to turn to the upcoming negotiations on the future relationship. Investors, who initially rallied on Johnson’s big election victory, have become more concerned this week, as he intends to write into law that the transition period cannot be extended”, explained analysts at Danske Bank.
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