For the UK, the rumours of the ‘divorce bill’ agreement between Britain and EU may compare only with the news about the engagement of Prince Harry. This is a real and long-awaited progress in Brexit talks.
The rumours were confirmed, and today’s morning GBP surged to the 1.3430 area. This has been just a preliminary agreement which should be confirmed on the national level. The next roadblock on the way to the trade agreement is the board with Northern Ireland. Irish Europe Affairs Minister McEntee told today Ireland could not accept the return to the hard border.
The Pound’s growth seems to be overbought. It is not supported by the state of the economy. Sir Jon Cunliffe, the BoE deputy governor, mentioned some weak points of the UK economy today, such as a weak potential for economic growth, lack of the inflationary pressure and low level of the consumer lending.
If GBP is able to settle above the 1.34 level, its short-term picture may improve significantly. At the same time, we should not count on a significant GBP growth since the final divorce bill figure is still unknown. GBP/USD needs a very good reason to claim a right to the area above the mentioned resistance.
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