Platforms

BlackBull Markets provides you with the world-renowned MetaTrader 4. Download it on the platform you prefer. Find out more.
Virtual Private Servers
VPS TradingNYC ServersBeeksFX

About us

Based out of Auckland, New Zealand, we bring an institutional trading experience to the retail market.

GBP/USD – the pair for the global economy?

Two main fundamental factors depressed the GBPUSD for the past couple of years—Brexit, and now recently, the Coronavirus.

The trade is relatively simple – once there is a vaccine for the Coronavirus, alongside certainty on Brexit talks, a good case can be made for the pair to reach its Pre Brexit/Pre Coronavirus levels around 1.45

Pound needs to meet two catalysts to hit 1.45

1.45 for the Pound against the U.S Dollar?

Let's go over the technical first. A Fibonacci drawn from 1.34 to 1.15, from the 2019 high to the 2020 low, can see the level of 1.45, hitting perfectly with the 161.8% retracement level, which was the level before the Brexit referendum results were announced in 2016. Alongside predicted further weakness in the US dollar, as vaccine hopes rise, the pound may rally on relatively less stimulus to its US counterpart.

We can also see some consolidation zones and congestion around 1.32 and 1.38, where bulls and bears fight it for a higher or lower move. However, movements to the upsides past these zones paired with positive fundamental news may see price levels freely hit strong Fib levels. A robust full recovery, with pre-Coronavirus level economic activity alongside a positive post Brexit environment, and we can see levels hit 1.50 – 1.55.

Brexit – time is running out, risky for the Pound

It has almost been five years since the Brexit referendum took place—a quick refresher on why Brexit occurred. There were talks amongst the public that they were getting the short end of the stick regarding the European Union and that the majority of the citizens in the UK wanted to leave. The Prime Minister at the time, David Cameron, disagreed with the notion that the UK public wanted to leave. Therefore, he initiated a referendum to show that the UK did not want to leave the European Union. It turns out he was wrong, and they did want to leave. David Cameron retired soon after.

Five years later, and we're edging closer to a deal. Brussels and the UK have started in-depth negotiations again after the Coronavirus ravaged the world. A "deadline" has been set for 31st December, where Britain will "leave" the EU regardless of whether a deal has been met. However, "deadline" is in quotations as both have agreed to extend deadlines that have passed many times before.

An EU official has stated that "its getting terribly late and may be too late already" and that "they [the EU and the UK] haven't quite reached where they had hoped to be." If a "no deal" Brexit occurs on 31st December, shock waves will be sent not only in the financial markets but also supply chains all across Europe and the UK. There is currently free trade and free transport out of the UK and into Europe and vice versa. However, a no-deal Brexit would mean that on the 31st December, the EU will treat the UK like any other country.

A no-deal Brexit should see the pound drop to a similar magnitude of that in 2016. However, if the optimistic scenario occurs and a vaccine comes alongside positive Brexit negotiations, we should see the pound rally against the US Dollar.

Pound Struggling to lift itself past 1.30

The Pound against the US Dollar is currently one of the most exciting pairs to be keeping an eye on, as it is essentially fighting between a rock and a hard place. Currently ranging just under 1.30, both nations have events coming up that will significantly shift the currency pair in either direction.

Pound against the US Dollar near that iconic 1.30 area

In the UK, we have Brexit negotiations affecting the Pound side of the equation. After the 30th of September passed, the UK is trying to buy time due to the worsening of the Coronavirus in Britain. There is pressure mounting onto Prime Minister Boris Johnson to ensure a deal goes through to avoid a compounding economic and human loss that a no-deal Brexit and terrible Coronavirus conditions bring to the UK.

Pound heavily dependent on Brexit results

According to a CNN Business analysis based on Citi and the Institute for Fiscal Studies forecasts, a no-deal Brexit could cost the UK economy $25 billion next year. Laurence Boone, Chief Economist at the Organization for Economic Cooperation and Development, stated that "The Combination of Covid-19 and the exit from the EU single market makes the UK outlook exceptionally uncertain" and that "actions taken to address the pandemic and decisions made on future trading relationships will have a lasting impact on the United Kingdom's economic trajectory for years to come."

Pound needs to worry about the US elections

The election is heating up with current polls across the Ditch, showing Biden taking a double-digit lead over Trump, with Joe Biden polling at 54%, and Trump polling at 43%. Biden seems to have the advantage over Black, Latinos, Whites with a college degree, and young voters. Conversely, Trump's strongest group continues to be White Evangelical Christians, rural voters, and whites without college degrees.

However, for both, the Coronavirus continues to run rampant. Unfortunately, investors and traders assume that America has given up on the Coronavirus and is learning to live with the virus. They can't get a second wave since they have not finished their first yet. Therefore, a second partial lockdown in the UK in response to the second wave has weighed on the Pound stronger than the US's long first wave.

As for the pair, a Biden Victoria plus positive Brexit talks should push the Pound higher, and the US dollar strengthens, moving past that strong 1.30 mark. However, a Trump win and further deterioration of Brexit talks should see the Pound weaken, and the US dollar strengthens.

Will GBPUSD shoot past 1.35?

The pound against the US Dollar has returned 11.4% since its March lows. As well all know, a lot has happened since March. But what has not come to fruition is the Brexit talks. As the transition deadline for the UK to leave the EU approaches, Brexit talks have suddenly come back into the spotlight. However, Prime Minister Boris Johnson has thrown a wrench in the Brexit negotiations, threatening to break international law by passing local legislation to override certain parts of the Brexit deal.

GBP/USD

The pound has been extremely volatile to these negotiations and developments with the Coronavirus. Yesterday, the Bank of England held interest rates at 0.1%, alongside stating that they explored how negative rates might be implemented. The pound dropped 0.6% against the US dollar, touching 1.28663. Petr Krapta, currency strategist at ING, stated that “they were exploring how negative bank rates could be implemented effectively, should the outlook for inflation and output warrant it at some point.

JP Morgan analysts weren’t too excited by the BoE’s announcement, stating that “there was little to be gained from taking action today” and that “should it need to react at a later date, the Bank will benefit from a little extra firepower left at its disposal having not wasted it today”

What will push the pound past 1.35

Brexit – or what doesn’t happen with Brexit. Currently, the EU has given the government until the end of the month to scrap the law they had proposed, or face legal action. Furthermore, they have till December to exit the EU properly as their transition period ends. These two factors have pushed the price of betting against the pound has skyrocketed. Therefore, being bullish on the pound has become cheap. Positive sentiment regarding a softer Brexit and progress on negotiations should push the pound higher.

Second factor: Of course, the Coronavirus. If the pandemic levels off, and economic damage is not as bad as it seems, the BoE may not implement negative rates and may push the pound higher.

Currently, the markets have not priced in the effect of negative rates. However, that may change as we get closer to crucial Brexit deadlines.

Pound sells off on Brexit woes

The pound is down 2% against the U.S dollar in the past couple of days, on growing prospects that the United Kingdom will leave the European Union without a trade agreement.

Brexit talks are set to continue this week, with UK's Prime Minister Boris Johnson playing hardball with European Officials. He has imposed a October 15 deadline, to which he plans to quit Brexit talks if no deal is reached.

The pounds have mostly forgotten Brexit, with the Coronavirus pandemic guiding everyone's attention away from the non-completion of Brexit.

Seema Shah, Portfolio manager at Principal Global Investors, stated that headlines over the weekend were a "timely reminder that, while the markets have been distracted by the UK's struggle to rejuvenate the economy, Brexit negotiations have quietly been going nowhere."

The main issues include competition, fisheries, and solving disputes.

UK government undermining Brexit, pushing pound lower

Further downwards pressure came from the revelation of the UK government planning to release legislation that would override critical parts of the withdrawal agreement – notably the deal that would undermine the agreement that Boris Johnson signed last year to avoid a return to a hard border.

The pound has been rallying since its March lows, up 14.13%. However, it has underperformed compared to its peers. For example, the Australian dollar has rallied 31% since its March lows.

The main issue for the pound comes from its appreciation, not discounting Brexit talks. As headlines start to creep up about Brexit near Boris' October 15 date, the pound's volatility will increase. Petr Krapta, a currency strategist at ING bank, stated that "the Brexit head is back on and sterling is, in our view, unprepared." This comes at a time when the UK's grip on the Coronavirus continues to slip, with daily cases spiking, recording the highest number of daily Coronavirus cases since May.

GBP/USD falls on a key support after 10 day streak

GBP/USD falls to 1.2563 on the back of relative strength over the past 2 weeks. General risk sentiment fueled the rally. However, fears of a second wave abruptly stopped the rally.

With the recent safe haven characteristics, the USD has been exhibiting over the past, it is not surprising that the USD has been strengthening across the board. Pair this with little substantial news on Brexit, and the drop in the GBP/USD is substantiated.

Strength in the USD also came from Retail consumer data from the commerce department posting record numbers, jumping 17.7% in May – with analysts originally forecasting an 8.5% increase. This shows that the backbone of the US economy, the consumer, is again providing optimism for the US markets.

This is on the back of Jerome Powell testifying to congress that the US government will likely need to spend more money to ensure the US can reach a full economic recovery. However, he maintained a cautious stance about the economy. This may be advantageous for Trump, as he may quote Powell for being supportive of an $1 Trillion Infrastructure bill the President is trying to pass through congress.

GBP/USD may still be under pressure due to Brexit and second wave fears

Weakness in the GBP may be attributed to Brexit talks progressing slowly, with Prime Minister Boris Johnson saying that the EU and the UK were “not far apart” relating to the country and the Unions relationship. The Brexit saga has been ongoing since 2016, and has pushed the GBP/USD has been ranking lower since the announcement.

Traders should watch the key psychological 1.255 level, as it may provide an entry point for a reversal.

The trend of GDPUSD

The US dollar and the pound were steady on Wednesday, and EU leaders are considering a request for a postponement of the Brexit, which is expected to extend the October 31 deadline by three months.

European Council President Tusk said on Twitter late Tuesday that he has suggested that EU leaders support the postponement of voting. British Prime Minister Johnson was forced by the parliament to extend for three months. However, some EU countries, especially France, may still require shorter deadlines. Johnson called the European Council President Tusk this morning to inform Tusk that he opposed the extension of Brexit and still hopes to leave the EU on October 31. The parliament will vote on the extension of Brexit and the parliament will hand over control to the EU.

EU officials recently stated that the EU will not decide on the extension of Brexit today. And then the decision may be made on Friday. Earlier, the British parliament made a dramatic vote on Tuesday, accepting the agreement in principle, but vetoed a three-day timetable for passing the necessary legislation. After the pound fell against the dollar and the euro on Tuesday, foreign exchange trading was generally calm. Today, the pound/dollar rose, hitting a high of 1.29115. The US dollar index also rose slightly, hitting a high of 97.66 in the day.

Johnson had previously threatened that if the parliament did not agree with his timetable, he would cancel the agreement, but he did not honour the threat. The market believes that this almost eliminates the possibility of no agreement to leave the European Union. Earlier Wednesday, the uncertainty of Brexit boosted safe-haven currencies. However, after the outside world believes that the EU may approve the extension, the rise of the yen and the Swiss franc will fade. The yen fell slightly to 108.55 against the US dollar and 0.991 against the Swiss franc.

The Supreme Court ruled that the decision of Boris Johnson to prorogue Parliament this month lacked reasonable justification, strengthening the pound. However, the Pound sterling has still been under fresh pressure on rising concern over the Brexit limbo. The PM Boris Johnson told MPs on Wednesday that he would not commit to seek for a Brexit extension, calling it the surrender act.

"UK politics remains the centre of attention in sterling markets. While the pound was initially lifted by the Supreme Court ruling, it has settled lower again on market perceptions that uncertainties about outcomes remain high and all possibilities are still on the table” says Hann-Ju Ho, Economist with Lloyds Bank.

GBP/USD Hourly Chart

The GBP/USD reached the highest level at 1.24984 after the release of the Supreme Court decision but stumbled to the lowest level at 1.23442 on the next day 25th September. There has been no sign that the pound sterling will gain its rising momentum and has been still below the level before the Supreme Court’s decision.
With a break of the 1.23 mark, further momentum could carry the Pound lower against the US Dollar, with the next key support sitting at the 1.2230 area. The deadline for Brexit is on the 31st October, which Boris Johnson wishes to stand by.