The pound fell lower in early trade and has remained in the doldrums ever since, as investors search for signs that the EU may be willing to re-negotiate the Irish backstop. Whilst Boris Johnson is due to visit Chancellor Angela Merkel, the chances of the EU ditching the most contested element of the Withdrawal Agreement are slim at best. EU Council President Donald Tusk rebuffed Johnson’s demands to reopen divorce talks on Tuesday. A no deal Brexit is starting to look inevitable.

Traders are focusing on Boris Johnson’s threat of dramatically reducing contact with the EU in 10 to concentrate on no deal preparations. Whilst the realisation that a disorderly Brexit could be just over 70 days away is unnerving pound traders. The base case scenario has been the UK leaving the EU with a deal. This is on the cusp of changing. Barclays today announced that they now see a no deal Brexit and a rate cut as the base case scenario. Surely it is only a matter of time until the BoE change their base case as well?

Without a practical solution to the Irish backstop problem and with MP’s due back from the summer recess at the beginning of September we can expect pound volatility to increase to new levels in the coming weeks. Headline trading is challenging at the best of times, headline trading weeks from Brexit will certainly result in some wild movements.

Whilst the UK economic calendar is light, investors will be looking to FOMC minutes due to be released at 18:00 BST, followed by US PMI data on Thursday and Fed Powell’s speech on Friday. Given the outdated nature of the minutes in light of the recent US - Sino trade dispute escalation and global recession fears, the reaction to the minutes could be limited.

GBPUSD Levels to watch:

The pound’s failure to break through $1.22 suggests that bearish momentum could be here for a while longer. Near term support can be seen at $1.2125, prior to $1.21 and $1.2065. On the upside immediate resistance is seen at $1.22, which if cleared could see the pair advance to $1.2250

CFD and forex trading are leveraged products and can result in losses that exceed your deposits. They may not be suitable for everyone. Ensure you fully understand the risks. From time to time, City Index Limited’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material. As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD rebounds after dismal US PMIs

EUR/USD is trading closer to 1.0850, rising in response to weak US PMIs, with the services one pointing to contraction. Earlier, German Manufacturing PMI beat estimates. 

EUR/USD News

GBP/USD advances to 1.2950 after US data

GBP/USD is trading around 1.2950, taking advantage of US weakness stemming from a downfall in Markit's Services PMI in the US. In Britain, the Manufacturing PMI exceeded estimates. 

GBP/USD News

Top 3 Price Prediction Bitcoin, Ethereum, Ripple: Consolidation process underway

The Crypto board continues to be immersed in an emotional leg-breaking, consistently punishing the emotional state of the traders with its continuous changes of direction.

Read more

XAU/USD unstoppable, breaks to fresh 2020 highs, approaching $1650/oz

XAU/USD is trading in an uptrend above its main daily simple moving averages (SMAs) while breaking above a bull channel. Gold is printing fresh 2020 highs hitting $1646.64 per ounce on an intraday basis.  

Gold News

FXStreet launches Real-Time Trading Signals

FXStreet Signals offers access to explanatory live webinars, real-time notifications when signals are triggered and exclusive membership to the company’s Telegram group, where users get direct guidance by our analysts and get room to discuss and interact.

More info

Forex Majors

Cryptocurrencies

Signatures