GBP/USD in a tight range ahead of Brexit talks in Brussels

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Nov 16, 2020
  • The GBP/USD pair is little changed today as traders wait for the upcoming Brexit meeting.
  • The UK has continued to maintain red lines ahead of the meeting.
  • Sterling will react to UK inflation and retail sales numbers that will come out later this week.

The British pound is wavering today ahead of important Brexit meetings in Brussels and important inflation and retail sales numbers scheduled for later this week. The GBP/USD is trading at 1.3200 while the EUR/GBP is at 0.8975.

GBP/USD
GBP/USD hourly chart

Brexit talks ahead

The UK and the European will kick-off another round of Brexit negotiations in Brussels tomorrow as the clock ticks to the December 31st deadline. Before the deadline, the two sides will need to make an agreement and ratify it across EU member states. This means that the two sides have just a few weeks to make progress on key issues.

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According to Bloomberg, the three main issues are about fisheries, regulations, and state aid. On fisheries, EU member states want unlimited access to UK fishing waters, where they catch most of their fish. The UK has said that, as a sovereign country, it needs to have the final say on who has access to its waters.

On state aid, the EU wants a commitment from the UK that its current and future governments will not provide unfair aid to businesses. The bloc argues that this will give UK firms unfair advantages. Similarly, on regulations, the EU wants to have a say on regulations the UK passes to prevent unfair trade practices.

UK red lines remain

Ahead of the meeting, David Frost, the chief UK negotiator said that the key red lines by the UK remains.

However, forex tradersand analysts believe that the two sides will ultimately reach an agreement. In a note today, analysts at ING wrote that:

“Our UK economist keeps noting that the prospects of a deal are looking slightly brighter, but also that (a) the core set of issues remains largely unresolved; (b) time for a deal is running out and the technical time for ratification in the EU and UK is dangerously shrinking.”

Later this week, the British pound will react to the inflation and retail sales numbers from the UK. The Office of National Statistics (ONS) will release the CPI numbers on Wednesday. Economists polled by Reuters expect the headline and core CPI to rise by 0.6% and 1.3%, respectively.

On Friday, the bureau will release the October retail sales, which analysts expect will show that sales rose by 4.2%.

GBP/USD technical outlook

GBP/USD

The GBP/USD price has been rising in the past few weeks. It has managed to rise by almost 4% since September 25. On the four-hour chart, it has also formed an ascending channel that is shown in blue. It is a few pips below the upper side of the channel. It is also on the same point as the 25-day exponential moving averages. Therefore, the pair will possibly remain in an overall bullish trend, with the next key level to watch being the upper side of the channel at 1.3315.

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