The British pound has enjoyed a good run against its US counterpart ever since rumors spread that the EU and the UK were close to reaching a deal on Brexit terms with some saying that a deal has already been reached on a settlement for the UK to leave the EU as well as favorable conditions for both parties to secure the Irish border.
Those rumors started to unravel today putting the pound under pressure as it is now as investors started to doubt that the border issue would be easily solved and added to that is the question of freedom of movement of UK and EU citizens which has hardly been mentioned and a solution looks increasingly unlikely before the deadline of December 15.
“This week’s sterling bounce on reports that the UK has accepted a higher financial divorce settlement with the EU seems based on the false assumption that the way is now clear for the European Council on 14-15 December to authorize moving on to the next phase of the Brexit process,” said Christopher Granville, managing director at investment research firm TS Lombard.
From a technical point of view we can see a few worrying signs emerging as the pound breaks through $1.35 with the formation of a double top which may also be a catalyst to push the pound lower firstly down to the $1.3370 formal support level and then even lower depending on how negotiations turn out.
