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Could Brexit Developments Impact The Pound?

GBP/USD has hesitantly bounced from annual lows at 1.3300 ahead of a short market closure for Thanksgiving as markets eye Brexit developments, with French fishermen blockades now expected Friday.

While the pair has been under heavy selling pressure recently, it isn’t yet in oversold territory. Ahead of a five-hour market closure lasting between 1800GMT and 2300GMT due to the Thanksgiving holiday in the US, GBP/USD pair is trying to regain some control.

The pair had hit fresh annual lows just to the north of the 1.3300 level earlier on during Thursday’s session but has since bounced to the 1.3320s.

The pair is now flat. The tone of Brexit developments seems to be tacking a tone for the worse again. A UK government spokesperson on Wednesday evening said that the UK Prime Minister told the Irish government that he was concerned about a substantial gap that remained between the UK and EU on the implementation of the Northern Ireland Protocol.

The French Fishing Association Body said that they did not get what they wanted regarding licenses. The body said that French fishermen would be taking action on Friday to block French ports and the Channel tunnel. The blockades will disrupt UK/EU trade and are likely to exacerbate the supply chain disruptions already plaguing the UK economy.

Data from the ONS released earlier in the morning showed that 14% of businesses in the UK had reported a shortage of workers in late November.

Further evidence of a strong UK labour market likely increases the chances that the BoE will hike interest rates by 15bps to 0.25% next month and this might be helping to negate the impact of negative Brexit news flow for GBP.

If the BoE disappoints expectations next month by refusing once again to hike interest rates, then GBP will see a negative reaction as hawkish bets are unwound.

Though GBP/USD has come under heavy selling pressure in recent weeks and is down 2.6% on the month, the pair isn’t yet in oversold territory.

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