16.10.202014:08 GBPUSD: Why did the pound fall so sharply and what did Boris Johnson say to the EU today

The British pound sharply slowed down in a pair with the US dollar after today's statements made by British Prime Minister Boris Johnson. One of the main tasks of the UK government, except for saving the economy and protecting the country's population from the coronavirus pandemic, is to conclude a trade agreement with the EU. However, everything is not going according to plan, and neither side wants to concede on the main key points.

Exchange Rates 16.10.2020 analysis

The British pound fell sharply after a small upward correction in the first half of the day. This happened during a speech by Boris Johnson, who said that it was clear to him from the very beginning that the EU would not accept the same trade conditions under which they interact with Canada. In his opinion, the "Canadian agreement" would be the solution to all problems, but for some reason, Brussels does not want this. Judging by what is happening now and what news is coming out, the October EU summit will not clarify the problem with the trade agreement, but will only make the situation worse for both sides.

Johnson lashed out at EU leaders, saying they were trying to maintain the ability to control British freedom of trade, including fishing, which is completely unacceptable for an independent country. Given the fact that there are only 10 weeks left until the end of the transition period on January 1, the probability of concluding a trade agreement very quickly tends to zero, especially given yesterday's EU statements, from which it is clear that no one is going to extend this period for sure, and there is no point in it.

The British Prime Minister was also clearly unhappy with the results of negotiations over the past few months, as well as the fact that the EU is ruling out a Canadian-style deal. "But despite this, we are ready for the changes that will occur on January 1. It is time to prepare our companies and businesses for the new realities," Boris Johnson said.

However, do not completely put an end to the EU-UK relationship. It is clear from the presentation that the discussion of practical aspects in which much progress has already been made, namely social security, aviation and nuclear, will continue.

Boris Johnson was also annoyed by the fact that after 45 years of EU membership, the UK is no longer willing to offer the same conditions as Canada. According to him, if none of the parties agrees to change the fundamental approach of their views, and, judging by the results of the EU summit, it is likely to be so, it will be almost one hundred percent sure to forget about the deal.

As noted above, the British pound reacted with a large surge in volatility, as a result of which all the growth that was achieved by buyers during the European session was immediately blocked by a fall in the pound by more than 90 points. But from a technical point of view, the picture has not changed in any way, except for some of the nearest levels. The bears are still looking at the level of 1.2850, a break of which will very quickly return the pound to the support of 1.2800, which will open a direct road to a new local minimum of 1.2740. It will be possible to talk about the prospects of buyers returning to the GBPUSD pair only if there is good news from the EU on Brexit, which will lead to a break in the resistance of 1.2950 and open a direct road to the area of 1.3010 and 1.3085.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Performed by Eder Anderson,
Analytical expert
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