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Jun 12 - 01:55 PM

GBP/USD - COMMENT-Sterling Slides As Global Economic Fears Expose UK Weaknesses

By Paul Spirgel  —  Jun 12 - 10:20 AM

GBP/USD is under pressure in early NY, dipping back below 1.26, near its European trough by 1.2575 nL9N2CG00C.
With the global growth outlook slipping on second-wave coronavirus fears, the major driver for recent sterling gains is evaporating, which leaves UK weaknesses such as EU trade uncertainties exposed and heightens the risk of a potential BoE to move to a negative rates 0#FSS:.
With the UK firmly opposed to seeking Brexit transition extension nL9N2CG00C, no-deal Brexit fears add another layer of uncertainty to the UK economic landscape, which should maintain downward pressure on GBP/USD.
As COVID-19 and Brexit realities set in, the pound is weakening versus the EUR and JPY as well, as recent global recovery optimismsubsides. Traders view British trade uncertainties owing to a no-deal or WTO-style agreement with the EU having a deleterious effect on UK trade and growth, decreasing the allure for foreign investment in the UK.
A break above EUR/GBP's trend high by 0.9054 and dip below GBP/JPY trend low at 129.52 opens the way for further GBP weakness, putting May 18's GBP/USD low at 1.2075 in sharper focus.


GBP Chart: Click here

Source:
Refinitiv IFR Research/Market Commentary

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