Brexit Briefing: Now It’s All About a Hard Brexit Or a Soft One

Talking Points:

  • As we wait for a Brexit negotiations to begin, it’s essential to confirm either a dual sides will strech an agreement or a UK will leave a EU though a deal.
  • That could meant a disproportion between GBP/USD during 1.10 or with a span during 1.50.
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Not prolonged ago, a Reuters news group asked FX strategists where they design GBP/USD to be once a Brexit dirt has staid – and a formula were striking. If assent and peace mangle out, and a understanding is concluded that both a UK and a EU are happy with, a span could stand to 1.50. If a dual sides brawl and a outcome is no agreement during all, it could decrease to 1.10.

Those, of course, are extremes. More expected levels, a check found, are 1.30 to a upside and 1.17 to a downside. Naturally, that’s a call long-term investors will have to make, rather than day traders, though one that even a latter need to consider about – are rises only corrections within a long-term downtrend, or are falls corrections within a long-term uptrend?

At present, GBP/USD is doing unequivocally small on a long-term basis, simply trade laterally within a extended channel.

Chart: GBP/USD Daily Timeframe (September 2016 – Apr 2017)

Brexit Briefing: Now It's All About a Hard Brexit Or a Soft One

Chart by IG

Over a march of a subsequent dual years, a emanate will be resolved one approach or a other – unless a timescale for a negotiations is extended. In a meantime, GBP/USD is certain to be buffeted by a newsflow, with any pointer of feud pulling a Pound reduce while some-more balmy tactful comments are expected to give it a lift.

Choosing between a dual options is probably impossible; we competence as good spin a coin. But it’s value temperament in mind during all times that an agreement would be in a interests of both sides – not only a UK’s. It’s roughly turn a cliché though would Germany unequivocally chuck divided a automobile industry’s chances of offered a vehicles into a UK? Would France jeopardise a dairy industry? Would Poland wish an outcome that ends a citizens’ chances of practice in Britain?

A deal, therefore, seems marginally some-more expected than no understanding – implying that over that two-year timeframe a British Pound is somewhat some-more expected to be stronger rather than weaker once all a sound has died down.

— Written by Martin Essex, Analyst and Editor

To hit Martin, email him during martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

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