GBP/USD slides as Brexit talks end with no deal in sight

The GBP/USD pair turned lower as traders reflected on the rising chances of a no-deal agreement. The pair is trading at 1.2675, which is the lowest it has been since yesterday. The sterling also declined by 0.30% against the euro and by 0.55% against the Swiss franc.

Brexit talks hit deadlock

The GBP/USD pair, which has been rising, turned lower after the end of the fifth round of Brexit talks that happened this week in London. As was expected, these talks made no meaningful progress, increasing the likelihood that the UK will leave the European Union without a deal.

In a lengthy statement, David Frost, the senior UK negotiator, blamed the European Union of failing to compromise on key issues. He agreed that the EU had listened to some of UK’s demands, including on the European Court of Justice (ECJ). However, the bloc remained adamant about key issues on trade and fisheries.

For one, the EU has rejected UK’s request for a Canada-style trading agreement, which removes tariffs on most items. The EU has complained that such a deal would be disadvantageous to EU firms. He said:

“Looking forward, there are large areas of convergence in many of the areas on which we are negotiating and ample precedents and texts on which we can base our work.  We will keep working hard to bridge the gaps and find a way through.”

In a rejoinder statement, Michel Barnier blamed the UK for not being willing to break the deadlock. He said:

“Over the past few weeks the UK has not shown the same level of engagement and readiness to find solutions respecting the EU fundamental principles and interests.”

At his core, Barnier believes that the EU is in a better negotiation situation than the UK. That is because the UK sells more than 45% of its goods to the EU. The EU, on the other hand, sells only 4.7% of its goods to the UK. Also, the UK’s trade negotiations with the US is taking longer than expected.

Negative interest rates

Meanwhile, analysts are concerned that the Bank of England (BOE) could be about to make a “monumental gamble” on negative interest rates. In an opinion piece today, Marcus Ashworth warned that negative rates would be bad for the UK economy. He said that they should only be used as a last resort.

He argued that the UK is fundamentally different from the European Union. For one, its economy is mostly dependent on the financial sector. Also, he cited the fact that the UK has an overall trade deficit with the rest of the world. As such, negative rates would put funding at risk. Instead, he recommended that the BOE should bring rates to zero and increase its QE program.

The GBP/USD pair is also reacting to the disappointing jobless claims numbers from the US. Data from the Bureau of Labour Statistics (BLS) showed that more than 1.4 million Americans applied for jobless claims last week. That was higher than last week’s number of 1.3 million. It was also the first time in weeks that the claims have increased.

GBP/USD technical forecast

The GBP/USD pair is trading at 1.2693, which is a few pips below this week’s high of 1.1.2761. On the daily chart, the price is above the 50-day and 100-day Hull Moving Averages (HMA). Also, the fast and slow Stochastic oscillator have moved above the overbought level of 70. Similarly, the price is along the 61.8% Fibonacci retracement level. Therefore, the price may continue rising as bulls target the next resistance at 1.2800.