GBP underperforming due to Brexit

Market News

• Market appears cautious in the early New Year
• GBP is the clear underperformer with tough Brexit negotiations likely ahead
• Markets focus on Donald Trump’s press conference on Wednesday

US equity markets retreated including the Dow Jones Industrial Average which closed 0.37% lower after resisting the psychologically important 20k level. Asian stocks followed suit, echoing the US sentiment, with the Shanghai Comp and Shenzhen down 0.30% and 0.15%, respectively

In FX, GBP was the clear underperformer in the G10 space with GBPUSD falling to its lowest level since late October after Prime Minister Theresa May’s reminder of her ‘firm’ stance and likely tough Brexit negotiations ahead. Philip Hammond, Chancellor of the Exchequer, also reiterated the political uncertainty around the Brexit negotiations commenting that “…we haven’t made any decision on which structure would best support our aspirations…”

In her first policy speech of an election year, German Chancellor Angela Merkel alluded to further tough negotiations commenting that the U.K. must adhere to four freedoms for market access

Our traders saw GBP supply against both the USD and EUR as both pairs broke recent technical levels, including EURGBP which broke the 50 and 100 dma. The rally above 0.8725 resistance opens up the possibility for EURGBP to move towards the 0.9000 level, especially given the recent tone from May vs Le Pen/Grillo

Our traders are of the view that the market is clearly cautious in the early New Year and lacking strong drivers. President-elect Donald Trump’s press conference (Wednesday) will be important as markets look for hints to Trump’s initial policy focus

via Barclays

Todays’ currency rates: