GBP/USD drops back from yearly highs at 1.3500 amid Brexit nerves

Brexit nerves have triggered a drop from year-to-date highs reached on Thursday of 1.3500.
Talks apparently went badly on Thursday, with level playing field issues reportedly causing problems.

Joel Frank Independent Analyst

GBP/USD has fallen back to around 1.3450 from yearly highs at 1.3500 reached earlier on during Thursday’s US session. The pair still closed Thursday FX trade with gains of over 80 pips or 0.6%.

Brexit talks hit hiccup but continue

UK sources today noted that talks did not go well today, with one senior government source saying that “at the eleventh hour, the EU is bringing new elements into the negotiation. A breakthrough is still possible in the next few days but that prospect is receding.” EU sources swiftly confirmed that talks had not gone well, although played down the claim that they were bringing new elements into discussions. Issues reportedly arose regarding the topic of level playing field, an area which reports earlier in the day had suggested solid progress had been made on.

Thursday’s bombardment of mixed news flow regarding the state of talks is likely a model of how things will go on Friday, so expect the GBP rollercoaster to continue. But talks are clearly coming to a head, and any communications over the weekend between UK PM Johnson and EU Commission President von der Leyen might again be seen as critical.

GBP/USD upside might well continue even in absence of positive Brexit developments, note many analysts, given that much of the recent upside in the pair can be attributed to USD weakness. A better pair to watch to gauge Brexit sentiment is likely EUR/GBP.

Author

Joel Frank

Independent Analyst

Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018, specialising in the coverage of how developments in the global economy impact financial asset

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