Before the coronavirus pandemic hit, Brexit was the news story making daily headlines on all major news outlets. The one-step forward, two-steps back pattern of the Brexit negotiations kept traders on their toes, never knowing what tomorrow holds in the world of Forex. Now, Brexit-related news is back in full force, and with good reason.
Despite having decided on December 13th as the final deadline for an agreement on the Brexit negotiations to be reached, a trade deal remains yet to be struck. The GBP jumped following news that both parties agreed to extend talks up until New Year’s Eve, leaving the post-Brexit fate of the UK and the EU still undecided.
Why did the GBP jump on this news? Over the course of the past four years, the general consensus has been that a no-deal Brexit would spell trouble for the UK as well as the EU, albeit to a lesser extent. This news means that the UK still has a chance to secure a trade deal until the end of 2020, or will otherwise conduct all future trades with the EU according to the World Trade Organization’s rules, i.e., new tariffs on imports from both ends among many other heated issues.
How is Brexit affecting Forex?
While EUR/USD flirted with a yearly high on Tuesday 15th, the GBP/USD rose due to Brexit hopes. Recent weeks have seen the Pound Sterling fluctuating in polarised directions with each news headline that emerges, suggesting either a probable EU-UK trade deal or lack thereof.
Continuing this week’s advance, the GBP/USD still remains vulnerable to emerging news headlines. With European Commission President Ursula von der Leyen claiming that there is a “very narrow” path to an agreement, while also stating that “it sometimes feels that we will not be able to resolve this question”, volatility is to be expected over the festive period. Although this may be a tense period for the UK, market swings can create opportunities for traders to profit from trading CFDs.
Whether a deal is struck or not, the initial impact on the UK economy and the remaining EU members will likely be a negative one. The future of Forex trading, however, is never set in stone.
So, while a trade deal continues to hang in the balance, make the most of market volatility by trading with CedarFX. Choose between a 0% Commission Account or an Eco Account to start trading with up to 1:500 and on all FX pairs!