GBPUSD is gaining after the decision to extend the trade talks

Mohammed Abdelkhalik
December 14, 2020

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GBPUSD Weekly Outlook: 14th December 2020

GBPUSD rose during Monday’s forex trading in the United Kingdom and the European market, amid growing hopes that Britain and the European Union would secure a free trade agreement following the decision to extend negotiations beyond Sunday.

During today’s trading, GBPUSD recorded gains by about 1.5% from Friday’s closing at $ 1.3222, to trade at $ 1.3408 from today’s session opening level at $ 1.3363.

The British pound ended trading last Friday, losing 0.5% against the US dollar for the second day in a row, with the continued stalled trade negotiations between Britain and the European Union, which increased expectations for a chaotic Brexit on December 31.

Daily chart of GBPUSD - 14th December 2020

The pound sterling recorded its first weekly loss in six weeks with the close of trading last week with losses estimated at 1.6% against the US dollar according to several leading forex brokers based in the UK, due to diminishing chances for the two parties to reach a trade agreement, which increased the chances of Britain leaving the European Union in a chaotic manner.

GBPUSD has an optimistic look with more caution

It is reported that “Boris Johnson” and “Ursula von der Leyen” agreed on Sunday to complete the trade negotiations by phone in an attempt to reach an agreement before the final Brexit scheduled for December 31.

Some analysts are warning that the sterling rally may not last, as Britain and the European Union have repeatedly struggled to narrow their differences, key issues remain unresolved, and there is still a risk that trade and business will plunge into chaos without an agreement.

Britain officially left the European Union last January and entered the transitional phase that will end on December 31, and during that stage, Britain was subject to the advantages of the single market and the customs union, and this is supposed to end from January 2021.

In the absence of an agreement, Britain would be subject to global trade rules and would lose nearly $ 1 trillion in annual trade from tariffs. Companies on both sides would be hit hardest, but the British pound would be more vulnerable to selling compared to the euro.

Although there are no great opportunities for Britain and the European Union to leave the current impasse, some expect that the two sides will make progress and it is possible that an agreement will be struck at the last minute, which will avoid Britain a chaotic and insecure exit.

Author Mohammed Abdelkhalik

Professional Trader and Analyst, economist in Financial and Forex market since 2004.holds an MBA from the American University in Egypt. Mohammed works as an economic writer and technical & fundamental analyst for many international Forex and financial trading companies in both English and Arabic on a daily basis.