The GBP surged in October last year when Boris Johnson announced new general elections in Britain. Conservatives won the elections, which gives a clear direction for Brexit and clears a lot of uncertainty regarding UK politics. As a result, the GBP surged higher, with GBP/USD climbing above 1.35, but it has been slipping lower since the elections, making lower highs as the reality sets in for GBP traders.

The weakness in the UK economy is picking up pace and the Bank of England is turning dovish, and is expected to cut interest rates soon. Although, the biggest worry is the trade deal with the EU. If UK doesn’t reach a trade deal by the end of the year, which is a really short period for such a detailed agreement, then they will end up with a hard Brexit. The UK PM spokesperson made a few comments below:

• There will be equivalence once we leave the EU
• UK government will set out in public what it wants to seek to achieve in a future partnership with the EU
• We are seeking a Canada-style free trade agreement
• There will be no alignment with EU rules

It seems that Britain will be aiming for a Canada-style deal with the EU. After all, the template is ready and they just need to adjust it a bit in order to apply it. This looks good at first glance and it should be positive for the GBP if they decide to push ahead with it.