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GBP/USD forecast for 08.09.2020

September 8, 2020

September 8, 2020

GBP/USD forecast: Pound got a cherry on topDmitri Demidenko

Fundamental Pound forecast for today

Financial markets are shocked, as the UK could override the Brexit

withdrawal agreement

In bad divorcees, mutual reproaches are easily replaced by bad threats. Boris Johnson seems to cancel the legal agreement with the EU in areas including Northern Ireland customs that he signed last year. The issues on the Irish border made Theresa May retire. Boris Johnson managed to sign a deal at the last moment which sent the pound up to $1.35 in December. And now, there is another act of the drama. The agreement achieved with such a difficulty could be now canceled. Is it a bluff?

According to a Financial Times source familiar with the matter, London is developing the internal market bill, according to which, filling in customs declarations for the supply of goods from Northern Ireland will become optional. Moreover, particular UK officials will now decide if the UK should notify Brussels of any state-aid decisions. So, the EU-UK agreement is now threatened, which increases the risk of the trade negotiations collapse and a no-deal Brexit.

So, it natural that the pound’s six-month and three-month volatility soared to the highest levels since June and May respectively. The Brexit topic is hot again, and the sterling doesn’t seem to be prepared for it. Credit Agricole believes that the escalation of the EU-UK political battle should send the [GBP/USD][1] down to 1.2. According to Nomura, the talks about the UK internal market bill are a cherry on top. It says the UK used to violate the agreements, including the uncoordinated doubling of fishing quotas and state aid regimes. For some time the market ignored this, and now, it is time to pay. Nomura projects the [EUR/GBP][2] surge to 0.95-0.98 in case of a no-deal Brexit.

However, there are also optimists among Forex analysts. Goldman Sachs, Morgan Stanley, JP Morgan still bet on reaching an agreement between the UK and the EU. They refer to the last-year situation when the sterling’s outlook was quite grim, but everything ended up positively. Moreover, the pound risk reversals signal that the situation is not as bad this year as it was in 2019.

Dynamics of pound risk reversals

![LiteForex: GBP/USD forecast for 08.09.2020][3]

Source : Bloomberg

I do not know what Boris Jonson plans, saying that everything will be good even without a deal with the EU. The UK economic recession resulted from the pandemic eased the concerns about a no-deal Brexit. But the UK economy should slide even deeper in this case.  Michael Saunders, a member of the Bank of England’s Monetary Policy, warns that the end of the financial aid programs will increase the risk of the UK unemployment surge to the fifty-year high, setting back the UK economic recovery. If so, the BoE may further loosen its monetary policy.

However, investors worry about some other matters now. If London abandons the agreements with the EU signed in 2019 and publishes the internal market bill, the [GBP/USD][1] could drop to 1.3 and lower. I recommend holding down the [short trades][4] entered on the breakout of the support levels of 1.33 and 1.3245 or taking profits if the information published by Financial Times is not relevant.

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Price chart of GBPUSD in real time mode

![GBP/USD forecast: Pound got a cherry on top][7]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. my.liteforex.com/trading/chart?symbol=GBPUSD&returnUrl=true
  2. my.liteforex.com/trading/chart?symbol=EURGBP&returnUrl=true&
  3. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/risk-reversal-pound-08-09-20.jpg?w=30&s=a176de9da5fe3aa46679eb5f037b7e96
  4. www.liteforex.com/blog/analysts-opinions/forecast-for-gbpusd-pound-is-threatened-with-taxes/
  5. my.liteforex.com/?category=analysts-opinions&slug=gbpusd-forecast-pound-got-a-cherry-on-top&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
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  7. cdn.liteforex.com/cache/uploads/blog_post/fundamental_analysis/liteforex-blog-gbpusd-08-09-20.jpg?q=75&w=1000&s=34c638453d79c7a0e1612e8727519255