AUD/USD Rallies to Yearly Open Ahead of FOMC Rate Decision

AUD/USD Rallies to Yearly Open Ahead of FOMC Rate Decision

Australian dollar Fundamental Forecast: neutral

  • AUD climbed as much as 5% against USD despite contraction in 1Q GDP possibly ending a historic period of economic expansion
  • The Federal Reserve rate decision and press conference on the 11th of June headlines the economic docket

It’s safe to say the Australian Dollar had a breakout week, exploding through the February highs and pushing back above the psychologically imposing 0.70-handle for the first time since the 1st of January. Benefiting from the weakness seen in the US Dollar over the past week of trade, the AUD soared as much as 5% from the monthly open (0.6656).

Although the “Australian economy is experiencing the biggest economic contraction since the 1930s,” Reserve Bank of Australia (RBA) Governor Philip Lowe believes it’s “possible that the depth of the downturn will be less than earlier expected”. However, with GDP contracting 0.3% in the first half of 2020, Australia looks to be heading for its first recession since 1991.

As household consumption falls to the lowest reading since the fourth quarter of 2008 (-1.1%) it is evident that without the fiscal support provided from the Australian government, through the JobKeeper and JobSeeker initiatives, GDP would have registered a contraction of 0.7%. With these initiatives set to expire in September, and households contributing over 50% to GDP, the return of consumer spending and confidence will be pivotal to an economic recovery.

GDP growth

Trade may become a contentious issue in the coming week as the Morrison government continues to aggravate Beijing through the implementation of new foreign investment laws. With Australia one of the more China-dependent economies in the world, a breakdown in this pivotal relationship could be disastrous. Retaliation from Beijing could threaten the recent surge in AUD with the implementation of further tariffs on Australian agricultural and mining products, possibly reversing the ground gained by the risk-sensitive asset.

Looking forward, the absence of meaningful local data brings attention to the Federal Reserve monetary policy announcement and press conference on the 11th of June. With expectations that Chairman Jerome Powell and his committee will keep the cash rate steady at 0.25% investor focus will turn to the forward guidance delivered by the US central bank.

Eco Calendar

USD Weighted Average vs AUDUSD (Daily Price Chart)

USD Weighted average vs AUDUSD

Source – Trading View

The US Dollar’s decline to three-month lows has seen the Relative Strength Index (RSI) slide into oversold territory for the first time this year. Collapsing through the 200-day moving average earlier in the month invigorated sellers as they forced price back to a supportive zone extending from the 2014 low.

Price reaction at trend support suggests that the Greenback may be attempting to carve out the monthly low, as it remains contained within a bullish Falling Wedge chart pattern. RSI could provide an early indication of intent, with a push back above 30 possibly leading to USD clawing back lost ground against its Australian counterpart.

— Written by Daniel Moss

Follow me on Twitter at @DanielGMoss

Gold Sinks, USD/JPY Surges as NFP Report Smashes Expectations

Gold Sinks, USD/JPY Surges as NFP Report Smashes Expectations

NFP REPORT: GOLD PRICE PLUNGES & SPOT USD/JPY RIPS HIGHER AS JOBS GROW BY 2.5 MILLION IN MAY

  • US nonfarm payrolls report for May 2020 crushed the median estimate on Wall Street looking for -7.5 million jobs lost, but the actual figure crossed the wires at 2.5 million jobs added
  • USD/JPY price action spiked higher in response to the better-than-expected NFP report
  • Gold prices puked as the precious metal was pressured lower alongside other safe-haven assets like US Treasuries

An absolutely astonishing US jobs report just crossed the wires. Nonfarm payrolls added 2.5 million jobs last month as the American labor market attempts to claw its way back from April’s catastrophic NFP report. The latest NFP data smashed market expectations by 9.5 million seeing that the median economist estimate was looking for the US economy to shed, yes lose, 7.5 million jobs.

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Correspondingly, the unemployment rate actually fell to 13.3% from 14.7% previously reported. In response to the shockingly positive NFP report, safe-havens dropped considerably as upbeat trader sentiment accelerated S&P 500 and Dow Jones Index futures higher ahead of the New York opening bell.

US 500

BEARISH

Data provided by



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Change in Longs Shorts OI
Daily -2% -17% -14%
Weekly -2% -10% -8%

GOLD PRICE SPIKES LOWER, TEN YEAR TREASURY YIELD EXTENDS HIGHER

Gold Price Chart Ten Year Treasury Yield Reaction to NFP Report May 2020

Chart created by @RichDvorakFX with TradingView

The price of gold plunged 1% immediately after the stunning US jobs report crossed the wires. The precious metal’s move lower mirrored the spike higher in the 10-year Treasury yield, which is now perched above the 0.9% mark, after extending its rally to 270-basis points over the last five trading sessions.

Read More – Russell 2000 Bests Nasdaq Rally, Bonds Plunge on ADP & PMI Data

USD/JPY PRICE CHART: 1-MINUTE TIME FRAME (05 JUNE 2020 INTRADAY)

USDJPY US Dollar to Yen Price Chart Reaction to NFP Jobs Report May 2020

USD/JPY price action also exemplifies the rejuvenation of trader risk appetite following the encouraging NFP data. The US Dollar jumped nearly 50-pips, or about half a percent, against its anti-risk Japanese Yen peer. As such, spot USD/JPY made an explosive move off the 109.20-price level to the 109.60-handle.

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US Dollar performance gained ground across the board and pushed the US Dollar basket (DXY Index) into positive territory on the day. This follows seven-consecutive days of downside for the broader US Dollar with the USD recently hemorrhaging as GBP/USD & AUD/USD Soar, USD/CAD Sinks.

— Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

British Pound (GBP) Latest: GBP/USD Multi-Week High; EU/UK Trade Update and US NFPs Ahead

British Pound (GBP) Latest: GBP/USD Multi-Week High; EU/UK Trade Update and US NFPs Ahead

British Pound (GBP) – EU/UK Talks, US NFPs and GBP/USD Forecast, Chart and Analysis:

  • GBPUSD looking to break above the 200-day moving average.
  • EU/UK Trade talk and US Non-Farm Payrolls will decide pre-weekend price action.

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GBP/USD Continues to Benefit From an Ailing US Dollar

Cable is trading around 1.2650 in early turnover and is back at highs last seen in mid-March as the pair continue to make a short-term series of higher lows and higher highs. Sterling as a currency is not particularly strong but GBP/USD upside is being driven by ongoing weakness in the US dollar, with the pair gaining around 350 pips (low-to-high) this week. This recent move may soon come under pressure with both the latest EU/UK trade talk update from EU chief negotiator Michel Barnier, expected at 12:00 BST, and the latest US jobs report at 13:30 BST.

The post-Brexit trade talks are unlikely to have sufficient progress this week to help underpin the British Pound. The stand-off over the three main areas of contention shows no sign of easing and it looks increasingly likely that European leaders will intervene soon to try and break the deadlock, according to one German official. Speaking to the European Policy Center think-tank on Thursday, German ambassador Michael Clauss said that while no progress had currently been made, reaching a deal was possible if the UK changed their stance, but warned that it was not possible for the UK to keep full sovereignty and have unfettered access to the EU internal market at the same time. EU chief trade negotiator Michel Barnier is expected to give an update on this week’s trade talks at 12:00 BST.

Later today, the monthly US jobs report (NFPs) is expected to show that another 8 million people in the US joined the unemployment line in May, sharply lower than the 20.5 million seen in April, while the country’s unemployment rate is expected to jump to 19.8% compared to last month’s 14.7%.

The daily GBPUSD chart continues to flash bullish signals and the pair are closing in on resistance off the 200-dma at 1.2734. Higher lows and highs highlight the positive sentiment in the pair and the CCI indicator show that GBPUSD remains extremely overbought. Near-term price action will depend on the EU/UK negotiation update and US NFPs and after this week’s solid rally, any US strength or Sterling weakness could see gains pared going into the weekend with 1.2480 – 1.2500 a likely area of support.

GBP/USD Daily Price Chart (December 2019 – June 5, 2020)

British Pound (GBP) Latest: GBP/USD Multi-Week High; EU/UK Trade Update and US NFPs Ahead

GBP/USD

MIXED

Data provided by



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Change in Longs Shorts OI
Daily -7% -12% -10%
Weekly -28% 42% 2%

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on Sterling (GBP) – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

Australian Dollar Forecast: Key AUD/USD Levels to Watch on US Dollar Capitulation

Australian Dollar Forecast: Key AUD/USD Levels to Watch on US Dollar Capitulation

Australian Dollar Analysis and Talking Points

AUD/USD | Largest Weekly Gain in 2-Months

AUD/USD

BULLISH

Data provided by



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Change in Longs Shorts OI
Daily -5% 1% -1%
Weekly -5% 0% -1%

USD selling has been the main theme throughout the week, as the reflation trade kicks in. Equity markets have remained buoyant despite the persistent macro uncertainties, which in turn has seen high-beta currencies supported, namely the Australian Dollar leading USD losses. In turn, AUD/USD hit its highest level since the beginning of January, having rose to a high of 0.7012, eyes now for a move to 0.7020 to offer resistance in the pair. While the pullback in the US Dollar may seem somewhat stretched, momentum has shown little signs of abating.

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Australian Dollar Technical Outlook

Momentum remains skewed to the upside, particularly as equity markets trend higher. While the risk of a short-term correction has elevated, the absence of a reversal in risk a sentiment has kept AUD/USD afloat. In turn, a break above 0.7000 opens room for a test of the YTD high at 0.7020. Dips likely to find support from 0.6900.

Implied Weekly range (0.6870-0.7140)

Support

Resistance

0.6950

0.7000

0.6926

100WMA

0.7020

YTD High

0.6900

0.7050

AUD/USD Price Chart: Daily Time Frame

Australian Dollar Forecast: Key AUD/USD Levels to Watch on US Dollar Capitulation

Source: IG Charts

— Written by Justin McQueen, Market Analyst

Follow Justin on Twitter @JMcQueenFX

Gold Prices Challenge Chart Support as US Jobs Data Enters Spotlight

Gold Prices Challenge Chart Support as US Jobs Data Enters Spotlight

GOLD & CRUDE OIL TALKING POINTS:

  • Gold prices probing chart support below $1700/oz figure
  • Crude oil prices edging toward resistance below $44/bbl
  • May’s US jobs data may top forecasts for improvement

Gold prices tiptoed higher yesterday, retracing a bit of the prior session’s selloff. The move seemed corrective, echoing a consolidative tone on the broad-based sentiment front. This was telegraphed by standstill on the benchmark S&P 500 stock index. Divergence between the US Dollar and Treasury bond yields – which typically serve as proxies for the yellow metal’s main driving themes – told a similar story. Crude oil price action was likewise uninspired.

The spotlight now turns to May’s US employment report. It is expected to show a 7.5 million drawdown in nonfarm payrolls, a dismal print telegraphing ongoing disruption from the Covid-19 outbreak. Nevertheless, such an outcome would mark improvement from the 20.5 million plunge in April. The jobless rate is seen rising to an eye-watering 19.1 percent, the highest since the Great Depression of the 1930s.

US economic news-flow has impressively recovered relative to baseline forecasts since late April, suggesting that analysts’ models have become overly pessimistic and opening the door for upside surprises. Such a result is likely to stoke building optimism about the economy’s ability to rebound from coronavirus malaise as global lockdown measures continue to be eased.

The implications of such an outcome for gold prices are somewhat clouded. On one hand, a positive print may limit scope for Fed stimulus expansion in the minds of investors, pushing up bold yields and weighing against the non-interest-bearing metal. On the other, ebbing haven demand may see the US Dollar lose more ground, complimenting gold’s credentials as an anti-fiat alternative. The response from crude oil may be more straight-forward: the cyclical commodity is likely to rise if the data tops forecasts and fall if it disappoints.

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GOLD TECHNICAL ANALYSIS

Gold prices continue to hover at a range floor in the 1679.81-93.92 area, with negative RSI divergence warning that a top may be taking shape. A daily close below support initially exposes the 38.2% Fibonacci retracement at 1645.40. Near-term resistance remains at 1765.30, the May 18 high.

Gold price chart - daily

Gold price chart created using TradingView

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices continue to edge higher toward resistance in the 42.40-43.88 area, with a daily close above that exposing the underside of former range support near the $50/bbl figure. Alternatively, a reversal back below 34.78 – now recast as support – appears to initially target the 27.40-29.11 inflection zone.

Crude oil price chart - daily

Crude oil price chart created using TradingView

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COMMODITY TRADING RESOURCES

— Written by Ilya Spivak, Head APAC Strategist for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

Nikkei 225 Surge Triggers Overbought RSI Reading

Nikkei 225 Surge Triggers Overbought RSI Reading

Nikkei 225, Japan, BoJ Talking Points:

  • Nikkei 225 rises to post-crisis highs as economic outlook remains grim
  • Unprecedented fiscal and monetary stimulus continues to fuel the rally
  • Could the Japanese benchmark push back to yearly highs?

The Nikkei 225 continues to outperform its major Asia/Pacific counterparts, with the index surging 50% from its March low as it pushes back to pre-crisis levels.

Even though Japan enters its first recession since 2015, the injection of over ¥ 200 trillion in fiscal and monetary stimulus to support the pummelled economy continues to drive the Japanese benchmark index higher. With Prime Minister Shinzo Abe announcing a further ¥117 trillion of stimulus on the 27th of May, while the Bank of Japan (BoJ) implementing a new ¥30 trillion small business lending facility, the cooperation between the government and central bank shows the determination to protect the local economy during a crisis, described by Deputy Prime Minister Taro Aso, “that goes beyond the scale of the Lehman shock”.

Doubling the pace of ‘risky asset’ purchasing in March has seen the BoJ’s balance sheet continue its meteoric rise, and considering the weakness seen in recent economic data prints, this trend is unlikely to desist anytime soon.

Image of Bank of Japan balance sheet

Source: Bank of Japan, FRED

Nikkei 225 Daily Price Chart

Image of Nikkei 225 index daily chart

Source – Trading View

Breaking back above the 200-day moving average (21,765) at the end of May has pushed the Nikkei to post-crisis highs.

The technical readings remain positive as the Relative Strength Index (RSI) registers its first overbought readings since November 2019, while the momentum oscillator retraces from its highest recorded daily readings.

Future development in the 50-MA and 200-MA may reinforce the bullish signal in RSI and momentum as the steepening of both gradients may lead to a ‘golden cross’.

However, with price failing to close above the former support-turned-resistance zone extending from the 2009-lows (23,000) and RSI beginning to slide back below 70, there is a possibility of a pullback towards trend support and its convergence with the 78.6% Fibonacci (22,278).

The 200-MA (21,285) provides the next key region of interest should price penetrate trend support, with the last line of defence at the 61.8% Fibonacci (20,795).

A daily close above the extreme of the 2009 support-turned-resistance zone may carve a path towards the 2020 open (23,449), with a re-entry of RSI into overbought territory signalling a possible push to test the yearly high (24,244).

— Written by Daniel Moss

Follow me on Twitter @DanielGMoss

USD/CAD Continues to Eye March Price Gap Ahead of Canada Employment

USD/CAD Continues to Eye March Price Gap Ahead of Canada Employment

Canadian Dollar Talking Points

USD/CAD holds near the monthly low (1.3468) as the Bank of Canada (BoC) keeps the benchmark interest rate at the “effective lower bound of ¼ percent” in June, but the update to Canada’s Employment report may influence the exchange rate as the economy is expected to shed 500K jobs in May.

USD/CAD Continues to Eye March Price Gap Ahead of Canada Employment

USD/CAD extends the series of lower highs and lows from the start of the month as the BoC announces that the “Bank is reducing the frequency of its term repo operations to once per week, and its program to purchase bankers’ acceptances to bi-weekly operations.”

Image of BoC interest rate

The decision suggests the BoC led by Tiff Macklem will scale back the dovish forward guidance as the central bank emphasizes that “any further policy actions would be calibrated to provide the necessary degree of monetary policy accommodation required to achieve the inflation target.

Image of DailyFX economic calendar for Canada

It remains to be seen if the update to Canada’s Employment report will influence the monetary policy outlook as the economy is expected to shed 500K jobs in May, while the jobless rate is projected to hit 15%, which would mark the highest reading since the data series began in 1976.

The ongoing deterioration in the labor market may put pressure on the BoC to further support the economy as “the level of real GDP in the second quarter will likely show a further decline of 10-20 percent,” but Governor Macklem and Co. may carry out a wait-and-see approach over the coming months as “the Bank expects the economy to resume growth in the third quarter.

In turn, the BoC may continue to rule out a negative interest rate policy as “the Bank’s programs to improve market function are having their intended effect,” and the central bank may alter the forward guidance at the next meeting on July 15 as the “decisive and targeted fiscal actions, combined with lower interest rates, are buffering the impact of the shutdown.”

With that said, the Canadian Dollar may continue to outperform its US counterpart as the Federal Reserveprepares to have the Municipal Liquidity Facility along with the Main Street Lending Program up and running in June, and the pullback from the yearly high (1.4667) may continue to evolve as USD/CAD snaps the range bound price action from April.

The Relative Strength Index (RSI) highlights a similar dynamic as the indicator tracks the downward trend from May, but the bearish momentum may abate over the coming days as the oscillator struggles to push into oversold territory.

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USD/CAD Rate Daily Chart

Image of USD/CAD rate daily chart

Source: Trading View

  • Keep in mind, the near-term rally in USD/CAD emerged following the failed attempt to break/close belowthe Fibonacci overlap around 1.2950 (78.6% expansion) to 1.2980 (61.8% retracement), with the yearly opening range highlighting a similar dynamic as the exchange rate failed to test the 2019 low (1.2952) during the first full week of January.
  • The shift in USD/CAD behavior may persist in 2020 as the exchange rate breaks out of the range bound price action from the fourth quarter of 2019 and clears the October high (1.3383).
  • However, recent price action suggests the pullback from the yearly high (1.4667) will continue to evolve as USD/CAD takes out the April low (1.3850),and the exchange rate may continue to exhibit a bearish behavior in June as the Relative Strength Index (RSI) extends the downward trend from the previous month.
  • Will keep a close eye on the RSI as it flirts with oversold territory, but the bearish momentum may abate over the coming days if the oscillator fails to hold below 30.
  • Need a break/close below the Fibonacci overlap around 1.3440 (23.6% expansion) to 1.3460 (61.8% retracement) to fill the price gap from March, with the next area of interest coming in around 1.3290 (61.8% expansion) to 1.3320 (78.6% retracement).

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— Written by David Song, Currency Strategist

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ECB Reaction: EUR/USD Surges on Large ECB QE Package – Update

ECB Reaction: EUR/USD Surges on Large ECB QE Package – Update

EUR/USD Price Analysis & News

  • Larger Than Expected ECB Package
  • Euro and BTPs Soar

Bottom Line: Larger Than Expected ECB Package

The ECB announced that it would add EUR 600bln to its Pandemic Emergency Purchase Program (PEPP), exceeding expectations of EUR 500bln, while also extending the program till June 2021. Alongside this, the ECB noted that it would reinvest maturing PEPP bonds until the end of 2022 at least, which is of note, given that it would allow the ECB to be able to deviate more from its capital key and for longer (beneficial for peripheral debt).

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Euro and BTPs Soar

In reaction to the larger than expected stimulus package, the Euro jumped to fresh highs of 1.1270 from 1.1200. However, the largest move had been observed in Italian bonds as BTP futures soared on the announcement (BTP yields dropping to fresh lows). Keep in mind, that BTPs has been the largest beneficiary of the ECB’s stimulus program with the central bank noting this week that in the first two months of PEPP, Italian bonds had taken up the largest share of the purchases.

EUR/USD

BULLISH

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Change in Longs Shorts OI
Daily -2% 0% -1%
Weekly -15% 4% -3%

*** ECB Lagarde Press Conference Recap – Update ***

In the press conference, ECB’s Lagarde noted that the central bank had not discussed including junk bonds into the program. However, one aspect to focus on for the minutes, which will be released later this month is that there had been a “broad” consensus over the size of PEPP, suggesting that not all members had agreed to the size of EUR 600bln.

Economic Forecasts

ECB Reaction: EUR/USD Surges on Large ECB QE Package - Update

Source: ECB

EUR/USD Price Chart: Intraday Time Frame

ECB Reaction: EUR/USD Surges on Large ECB QE Package - Update

Source: DailyFX

Italian BTPs Price Chart: Intraday Time Frame

ECB Reaction: EUR/USD Surges on Large ECB QE Package - Update

— Written by Justin McQueen, Market Analyst

Follow Justin on Twitter @JMcQueenFX

Crude Oil Rally Hindered by Gap Resistance, OPEC+ Meeting in Limbo

Crude Oil Rally Hindered by Gap Resistance, OPEC+ Meeting in Limbo

Crude Oil Price, Chart and Outlook.

  • Early OPEC+ meeting remains in doubt.
  • Crude oil unable to make a decisive gap move.

Oil – US Crude

MIXED

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Change in Longs Shorts OI
Daily -3% 7% -1%
Weekly 14% -16% 3%

US Crude Oil Consolidating After Sharp Bounce Back.

Doubts remain whether today’s OPEC+ meeting will take place, with no official confirmation one way or another to guide traders. The meeting was originally set for June 9-10 but talk surfaced late-May that the meeting could be forward to today to announce an extension of April’s production cuts. The 9.7 million barrel per day production cut runs out at the end of June and market talk is that OPEC+ members may extend these cuts for another month to help balance faltering demand.

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Crude oil has rebounded sharply off its late-April low with little in the way of any consolidation. A series of lower highs highlight the recent positive sentiment in the space and recent price action has taken crude to the bottom of a gap on the daily chart made between March 6 and March 11 this year. Followers of gap trading normally look for any gap to be filled as there is little in the way of support or resistance to slow the move. The daily chart shows the gap between $36.59/bbl. and $41.94/bbl. and the lower level continues to temper a full re-trace of this gap. The CCI indicator shows the oil market in overbought territory and there needs to be a positive fundamental driver to push oil higher through this resistance to faciltate further gains. If OPEC+ cuts are extended, and the market retains its overall risk-on sentiment, then a break through $41.19/bbl. would set up the 61.8% Fibonacci retracement level at $43.36/bbl. as the next target ahead of the 200-dma, currently at $44.79/bbl.

US Crude Oil Daily Price Chart (2019 – June 4, 2020)

Crude Oil Rally Hindered by Gap Resistance, OPEC+ Meeting in Limbo

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on Crude Oil – bullish or bearish?? You can let us know via the form at the end of this piece or via Twitter @nickcawley1.

British Pound (GBP) Latest: GBP/USD Increasingly Nervous About Brexit

British Pound (GBP) Latest: GBP/USD Increasingly Nervous About Brexit

GBP price, Brexit news and analysis:

  • GBP/USD is easing back Thursday after a week of gains as the June 30 deadline for the UK to ask for an extension of its Brexit transition period approaches.
  • So far, there has been little progress in this week’s UK-EU talks on a post-Brexit trade deal but the UK Prime Minister has pledged not to ask for a talks extension to prevent the UK from concluding the transition period at the year-end without a trade agreement.
  • A poll has suggested that GBP will weaken if no extension is asked for.

GBP/USD facing Brexit risks

Talks this week between the UK and the EU on a deal to govern trade between them once the post-Brexit transition period concludes at the end of this year continue to show few signs of progress. However, there are still no indications that the UK government will ask for an extension of the talks to prevent the transition period from ending without a trade agreement.

The deadline for the UK to ask for an extension is June 30 and there are fears that if the UK does not do so it will have to trade with the EU under World Trade Organization rules from the start of next year – and that prospect would likely weaken GBP.

GBP/USD Price Chart, Daily Timeframe (February 17 – June 4, 2020)

Latest GBP/USD price chart.

Chart by IG (You can click on it for a larger image)

GBP/USD

BULLISH

Data provided by



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of clients are net short.

Change in Longs Shorts OI
Daily -13% 10% 0%
Weekly -33% 48% 1%

As the chart above shows, GBP/USD has been rising as a lifting of coronavirus lockdowns, hopes of a global economic recovery and continuing central bank stimulus has attracted investors to so-called risk assets such as stocks and currencies like GBP, EUR and AUD.

However, if June 30 passes without a request for an extension, GBP will likely drop back. Concerns about this were heightened Wednesday when the Bank of England said commercial banks should prepare for the possibility ofno deal in the post-Brexit trade talks.It is fundamental to the Bank of Englands remit that it prepares the UK financial system for all risks that it might face, the BoE said in a statement.

Moreover, a poll by the Reuters news agency has suggested that Sterling will lose its recent gains against the US Dollar and weaken further if the UK does not ask for an extension to its Brexit transition period by the June 30 deadline to allow more time for the talks on a trade deal with the EU.

GBP/USD is expected to have weakened to 1.23 by the end of June, according to the poll this week of more than 50 foreign exchange strategists. However, GBP/USD bears should also note that any hint of a deal would likely lift the pair again.

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We look at Sterling regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts

— Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below