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Original title: today’s meeting is very important, with 3 endingsGBPHow will you do?
On Tuesday, two good news emerged from the negotiations between Britain and Europe:
First, the British government issued a statement stating that it has reached an agreement with the EU on the outstanding issues related to Northern Ireland, which means that some provisions of the Internal Market Act that give the British minister unilaterally repealing the Brexit deal will no longer be necessary.
Second, the British government agreed to drop disputed clauses that violated part of the Brexit deal, thereby eliminating a dispute that could derail future trade negotiations.
But on the other hand, there is still a constant stream of statements saying, “There is very likely a hard Brexit.”
Barnier, the EU’s top Brexit negotiator, reportedly told EU ministers on Tuesday morning that there was little hope of reaching a deal with the UK before the end of the year. Barnier said:
“We are currently close to the need to prepare emergency measures, that is, a contingency plan for a no-deal Brexit.”
Even British Prime Minister Boris Johnson said he still wanted and hoped to reach a trade deal, but also warned that it might be time to realize that the negotiations had failed. Laying the groundwork for future cooperation with the UK is “more important than hastily reaching an agreement. We cannot sacrifice long-term interests for short-term political goals.”
It now appears that negotiations between the UK and the EU on future trade relations remain stalled and the deal is pending.
Today will mark the beginning of an important node-British Prime Minister Johnson will hold talks with European Commission President Von der Lein on Wednesday night., In the hope that the UK and the EU can reach a trade deal before the end of the year.
Earlier, foreign media reported that since there are only three weeks left before the end of the transition period, Wednesday’s meeting may be for Brexit negotiations.Last chance。
However, on Tuesday, European Commission spokesman Eric Mamer denied that Wednesday was the deadline for negotiations and said he hoped the meeting between Johnson and von der Lein would pave the way for further negotiations.
As the UK and EU are about to hold crisis talks in Brussels, the reality that the two sides may not reach a trade deal has prompted sterling traders to rush to adjust their positions. .
The relative cost of hedging the risk of a fall in the British pound in the coming week has now reached the highest level among the major world currencies.It is only surpassed byTurkish Lira. Also, the one-period implied volatility of the British pound has risen almost three times this quarter than the nearest one.
Today’s investment bank analysts have a divided view of the outlook for the pound.
RBC Europe Ltd. Now I believe that the probability of reaching an agreement has dropped from 70% a week ago to 50%, and I believe that if an agreement is not reached,GBP to USDIt will drop as much as 6% in a few days. Mitsubishi UFJ warned that the pound could plummet 8% in a week:
“After four years of repeated speculation, currency traders and British pound investors have become confused.”
Freddie Lait, chief investment officer at Latitude Investment Management, said in an interview with the television station:
“Currently, any form of agreement is good for the pound.”
Lait expects that if a deal is reached, the pound will appreciate between 5% and 6%, and vice versa, there will be a similar drop.RBC expects the pound to rise between 2% and 3%, but recommends selling when the pound rebounds.：
“Now we are faced with this kind of dual outcome. Johnson went to Brussels for final talks. Both sides urged the other side to make concessions. This will inevitably trigger great volatility. The outcome will appear in mid-December. deplete market liquidity, this only compounds the danger. “
He believes that if negotiations break down,EUR/ GBP will rise to 0.95, if a breakthrough is achieved, it will fall to 0.85. Juckes said: “The only thing I don’t know is how to judge the possibility of these two outcomes.”
The market predicts that if the British pound falls, UK consumer prices will rise and the UK two-year inflation swap has soared to its highest level in a year. Coupled with the threat of trade barriers after the Brexit deadline on December 31, it means that traders expect import costs to skyrocket.
The following are 3 potential outcomes that need attention.
Reach a business agreement
The British Pound may find resistance on its first attempt to break the 2019-2020 high of $ 1.3514 to $ 1.3539;
If broken, the next target will be the 76.4% Fib retracement level at 1.3677 of the sterling decline from April 2018 to March 2020;
If the British pound closes above this level, there will be almost no technical resistance before hitting the 1.40 mark; Furthermore, the 38.2% Fib retracement level of 1.3620 that the pound has fallen since September 2014 will also be a key level.
The negotiation failed
The first major threshold for the decline in the British pound is around 1.31. The mid-November low was 1.3106-09, and the 55-day moving average is currently 1.3096;
The bottom lane of a multi-month channel hovers around 1.3033 on Tuesday, which may set the standard for the pound trend in 2021;
Breaking below the lower track of the channel may indicate further downside, and strong buying interest may be around 1.2850, close to the October low.
Mini deal
If a compromise is reached, the pound can remain within the short-term fluctuation range;
The 1.3539 cycle high will be a stiff resistance, and by the end of the year, the pound is likely to remain in the 1.32-1.34 range.
This article is in part from Sina US stocks
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