The pound-dollar pair continues to show increased volatility: if the price flew within the 150-point range in early December, then recently, the price band has expanded to 300 points.
So, last Friday, traders recorded a low at 1.3134, and today it has marked a high at 1.3445. However, such a storm of volatility is useless for both bulls and bears of GBP/USD. It is equally risky to open short or long now, as the mood of investors is changing at a kaleidoscopic speed. Official statements are intertwined with numerous rumors that flood the press. It is noteworthy that traders react to official and unofficial messages in almost the same way. Therefore, it is unpredictable. at the start of trading on monday, GBP/USD recorded a 150-point growth gap, which, however, was almost completely closed during the Asian session. The pair fell into the framework of the 32nd figure in the European session, but after a few hours it found itself in the area of the 34th price level. But even at this height, buyers of GBP/USD could not resist: traders wandered in 100-point steps throughout the day, but by and large they stood still. Neither bulls or bears can turn the tide in their favor against the backdrop of a contradictory fundamental picture.
Let me remind you that following a face-to-face meeting between Boris Johnson and Ursula von der Leyen, a decision was made to continue the negotiation process. The deadline was set for December 13 (last Sunday), but on Friday it was clear that the negotiators would not be able to reach the finish line by the deadline. Two scenarios were discussed in the press: either the parties put the final point in the negotiations, or the negotiators will take more time. The second option was implemented: the heads of the negotiating groups stated that they need to "go another mile".
But the initial optimism over the prolongation of the negotiation process quickly enough came to naught. The fact is that Downing street voiced quite pessimistic rhetoric about the prospects for further negotiations. According to a spokesman for British Prime Minister Boris Johnson, concluding a trade deal "is an unlikely option", due to the remaining "significant gaps".
No sooner did the GBP/USD bears win back the pessimism of the British government, as the influential Financial Times became the focus of attention. Referring to their sources, FT journalists said that the deal, firstly, will be concluded at the last moment, and secondly - actually on the terms of the Europeans. According to insider information, the European Union will make some last-minute concessions to London, but the British will have to agree to the key demand of Brussels, which is that the country will not be able to violate EU rules on competition in the market.
According to the sources, the British will eventually be forced to give in due to the "asymmetry of influence" between the two sides. In dry terms, this means that Britain will send just over 40% of its exports to the EU, while the key countries of the eurozone send only 5-6% of their exports to Britain. In addition, according to insiders, Brussels intends to demonstrate to supporters of Italexit, Grexit and other Eurosceptics that leaving the EU is a politically failed and economically unprofitable idea. Therefore, the leaders of the EU avoid the phrase "mutually beneficial result" when it comes to negotiations with the UK. According to sources familiar with the negotiations, the Europeans made it clear to their British counterparts that on a global scale, the UK is only one of many markets for the EU. While London is more interested in access to the single market, especially in light of Joe Biden's victory in the US elections.
This news report from the Financial Times provoked a growth momentum for the GBP/USD pair, although insiders voiced generally obvious things. In contrast to the FT report, Barnier's comments emerged, who said that the fishing issue is still not resolved and is the most difficult in the negotiation process. In addition, according to the Sunday Times, UK supermarkets have begun stocking up on food in droves, preparing for a hard scenario. According to journalists, similar recommendations were made to retailers from Downing Street. Allegedly, government officials "insistently demanded" from suppliers to create stocks for six weeks and provide conditions for their storage.
Such a contradictory fundamental background does not allow GBP/USD traders to determine the price movement vector. The pair visited the area of the 32nd figure and the 34th figure today. As a result, the pound settled in the middle of the 33rd price level in anticipation of more news from the fields of the negotiation process. As you can see, price fluctuations of GBP/USD are unpredictable - the pair can turn 180 degrees in an instant. Therefore, trading the pound is now extremely risky and impractical. It is unknown exactly how long the current round of negotiations will last. What the negotiators will come to is also unknown. Obviously, the parties must come to some kind of decision before the end of the week. Further - the pre-Christmas and pre-New Year period. Therefore, a bomb of information can explode at any moment, having a strong impact on the British currency.