⏳ Final hours! Save up to 60% OFF InvestingProCLAIM SALE

Pound Above Lows Despite EU Warning No-Deal Brexit Most Likely Outcome

Published 11/12/2020, 20:14
Updated 11/12/2020, 21:13
© Reuters.
GBP/USD
-
CBKG
-

By Yasin Ebrahim

Investing.com – The pound moved off session lows Friday despite the EU warning that a no-deal Brexit would be the most likely outcome as both sides are unlikely to reach a post-Brexit trade agreement by the Sunday deadline.

GBP/USD fell 0.52% to $1.3222, though had been as low as $1.3135.

European Commission President Ursula von der Leyen said a no-deal Brexit was the most likely outcome following "difficult" talks. The dour sentiment was echoed by the U.K., with Prime Minister Boris Johnson conceding that a no-deal Brexit was now a "very, very likely" outcome after French President Emmanuel Macron refused to ease his stance on fishing quotas.

The prime minister earlier this week failed in his bid to break the deadlock in negotiations during a dinner meeting with the EU's von der Leyen.

Johnson has floated the idea of the U.K. adopting an Australian-styled trade relationship with the EU in a no-deal Brexit scenario, leading Britain to trade with the EU on World Trade Organization terms. This would at the "very least, a lack of a cohesive agreement would wreak havoc on supply chains, borders and markets, and trade worth close to $900B a year," Stifel Economics warned.

Commerzbank (DE:CBKG), drawing a parallel from the aftershock of the EU referendum in 2016, said that a steep drop in the pound on the initial reaction of a no-deal Brexit could be followed up by correction on profit taking as some may want to wait to see the fall-out from a hard-Brexit on the economy.

If the market takes longer to “assess the implications of a no-deal Brexit for the pound, then “the currency could drop significantly in the first moment … but a correction could quickly set in due to profit-taking and because many market participants want to wait for the actual economic effect,” Commerzbank said.

“Something similar had happened after the EU referendum. Here, many had expected a recession due to the uncertainty surrounding the Brexit, but it failed to materialize. The pound recovered from its initial crash, albeit not completely,” it added.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2024 - Fusion Media Limited. All Rights Reserved.