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Oct 14 - 11:55 AM

GBP/USD - COMMENT-Broad Dollar Weakness Helps Sterling Shrug Off Brexit Uncertainty

By Paul Spirgel  —  Oct 14 - 10:15 AM

GBP/USD extended its recovery from early European lows by 1.2865 as broad dollar weakness helped the pound shrug off Brexit-related uncertainties in the face of Thursday's UK deadline nL1N2H50MK.

Though Brexit, COVID and negative-rate speculation remain potential head winds for sterling, the overall risk environment and its effects on the dollar are outweighing other factors for now.

The market also appears to remain hopeful for a last-minute Brexit deal before the Oct.
15 UK deadline, the EU deadline in early November or the drop-dead date on Dec.

A breakthrough would initially boost GBP/USD, but then the UK faces post-Brexit economic uncertainty and draconian COVID conditions as Britain and its largest trade partner, the EU, endure second-wave coronavirus outbreaks.

UK short-sterling futures 0#FSS: hint a true recovery is far down the road.
A EU-UK trade deal may not be the panacea GBP/USD longs desire.
The 2020 high at 1.3481 and December 2019's post UK election high at 1.3516 are likely to cap flash sterling gains on an announced Brexit deal.

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GBP Chart: Click here

Refinitiv IFR Research/Market Commentary


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