Hard Brexit Comments From Merkel Should Keep GBP Bearish

Posted Wednesday, July 8, 2020 by
Skerdian Meta • 1 min read

The GBP crashed lower when the British public voted to leave the EU in 2016. Since then, whenever we have heard rumours about a no deal Brexit the GBP has turned quite bearish. Although, after Boris Johnson’s Brexit deal, which was voted by the British Parliament the situation stabilized for the GBP.

But the end of 2020 is approaching and it is getting increasingly difficult to reach a trade deal until then, otherwise the UK ends up with a hard Brexit. Angela Merkel was speaking earlier today, hinting that there might be a hard Brexit, which should keep the GBP bearish if such comments keep coming.

Comments from Merkel

  • Progress in UK talks limited, we should prepare for possibility of no deal
  • Says she supports recovery fund
  • Progress in EU-UK negotiations “has been slim to put it diplomatically”
  • “I will continue to push for a good solution but we should also prepare for a possible no-deal scenario.”
At times the market worries about comments like this; at other times it shows a bit more patience. For me, it’s tough to take the EU seriously after they folded in the last round. But, such comments are negative for the GBP nonetheless and GBP/USD has lost around 30 pips after Merkel’s comments.

More Comments from Merkel

  • EU needs unity for economic recovery plan
  • Expects ‘good cooperation’ with EU partners
  • Germany determined to help EU overcome virus crisis
The next week or so is going to be crucial for European assets as all eyes will turn towards the progress on the recovery fund ahead of the 17-18 July summit. European Commission president von der Leyen is holding talks today on that, likely to try and survey the floor and gather opinions before they get into crunch talks at the end of next week.
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