Sterling on the Back Foot As No-Deal Brexit Fears Return

GBP/USD extended its losses in early trading on Monday, after sliding for three consecutive days last week. News that UK Prime Minister Boris Johnson is ready to allow negotiations to fail rather than compromise on certain Brexit principles has driven stering lower. This week a penultimate round of Brexit talks are due to take place in London.

Over the weekend, the UK’s Chief Negotiator David Frost stated: “From the very beginning we have been clear about what we can accept in these areas, which are fundamental to our status as an independent country. We will negotiate constructively but the EU’s stance may, realistically, limit the progress we can make next week.”

Both the UK and the EU have accepted that they need to reach a deal by mid-October. Boris Johnson maintained a hard stance on Sunday, saying that leaving the EU without a trade deal would still be a ‘good outcome’ for the UK.

A statement from the Prime Minister due to be released on Monday outlines that: ‘The EU have been very clear about the timetable. I am too. There needs to be an agreement with our European friends by the time of the European Council on October 15 if it’s going to be in force by the end of the year.’ The statement goes on to say, ‘If we can’t agree by then, then I do not see that there will be a free trade agreement between us, and we should both accept that and move on.’

Meanwhile, the UK government has said that a rise in daily coronavirus cases is ‘concerning’. On Sunday, Britain’s Health Secretary Matt Hancock said; “The rise in the number of cases that we’ve seen today is concerning.” He added that; “The cases are predominately among younger people, but we’ve seen in other countries across the world and in Europe this sort of rise in the cases amongst younger people leading to a rise across the population as a whole.” 

Cable has been in an uptrend since late March, when it bottomed at 1.1412. Looking at the daily chart we can see there is major potential support where the key psychological level of 1.30 and the 23% Fibonacci retracement level coincide.