Doing business in China is difficult » Discussions


Two Major Uncertainties Encumbering GBP/USD

  • May 7

    Among the various uncertainties in the global financial markets, Brexit negotiations and the US presidential election are the most concerned. In terms of Brexit, it is reported that the UK government will officially withdraw from negotiations with the EU if a deal isn't achieved this week. The British government has repeatedly stressed the seriousness of the statement, with a deadline of October 15 (this Thursday) set by Prime Minister Johnson. While both sides have acknowledged they are at loggerheads, Johnson indicated that the country's trading arrangements with the EU would be like Australia's if no deal was reached.To get more news about >WikiFX, you can visit wikifx.com official website.


      Johnson's Internal Market Bill, which has passed its third reading in the Commons, is aimed to be an incentive for the EU to make concessions. But the Bill is a violation of the Brexit agreement signed earlier. The EU thus intends to take Britain to the International Court of Justice (ICJ). With that said, I believe the impasse can hardly find a break since the UK has tried to get concessions from the EU by breaking international law, and since the EU will be determined to sue the UK for the unacceptable illegal means. The pound may see a wide drop under selling pressures once the EU takes the UK to the ICJ immediately after the British government announces its withdrawal from the negotiations this Thursday.
    In terms of the US presidential election, Trump failed to chalk up sympathy votes by his speedy recovery from COVID-19. Besides, his approval ratings haven't received any upside despite Vice President Pence's average performance in the television debate against another candidate. In this case, Trump is likely to fight back with unusual tactics, which may raise the uncertainty in the market and sentiment. As a result, the US dollar will have a chance to rally bolstered by the lasting risk aversion. Conversely, the pound may be dragged down by Brexit uncertainties. In the following week, the selling of the pound may be enduring unless Johnson dramatically makes significant concessions to resolve the crisis of hard Brexit. But in my opinion, to break the deadlock is difficult because the purpose of Johnson's Internal Market Bill is to force the EU to make concessions rather than doing so himself.