The GBP/USD pair is staging a recovery after diving to fresh February lows of 1.1914 in the mid-North American session, bolstered by overall US Dollar (USD) weakness. Nevertheless, it remains trading below the important 200-day Exponential Moving Average (EMA) at 1.2132, keeping the downtrend intact. At the time of writing, the GBP/USD is exchanging hands above the 1.2020 figure, above its opening price by 0.30%.
The pair has been under heavy selling pressure for the third straight day on Friday and dropped to its lowest level since January 6 during the first half of the European session. The pair has been under immense pressure since the start of the year, as the UK and EU are yet to agree on a trade deal and the prolonged Brexit uncertainty continues to weigh on the British Pound.
The UK and EU are yet to agree on a trade deal, and the prolonged Brexit uncertainty continues to weigh on the British Pound. The UK and EU have been locked in negotiations since the UK left the European Union on January 1, 2021. The two sides have yet to reach an agreement on issues such as fishing, state aid, and the level playing field. The UK has refused to extend the transition period, which is due to end on December 31, 2021, and the two sides have yet to reach an agreement on the future trading relationship.
The uncertainty surrounding the Brexit negotiations has weighed on the British Pound, and the GBP/USD pair has been in a downtrend since the start of the year. The pair has dropped from 1.3600 at the start of 2021 to its current level of 1.2020.
In the opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, the GBP/USD could extend the decline to the 1.1900 region in the next weeks. The pair is likely to remain under pressure until there is more clarity on the future trading relationship between the UK and EU.
The GBP/USD could remain under pressure in the near-term, as the UK and EU are yet to reach an agreement on the future trading relationship. The uncertainty surrounding the negotiations is likely to weigh on the British Pound, and the GBP/USD pair could extend its decline to the 1.1900 region.
At the same time, the US Dollar could remain weak in the near-term, as the US economy is still in the early stages of its recovery from the coronavirus pandemic. The US Federal Reserve is likely to maintain an accommodative monetary policy for the foreseeable future, which could keep the US Dollar weak.
In conclusion, the GBP/USD pair is likely to remain under pressure in the near-term, as the UK and EU are yet to reach an agreement on the future trading relationship. The US Dollar could remain weak in the near-term, which could buoy the GBP/USD pair. However, the pair is likely to remain below the 200-day EMA at 1.2132, and could extend its decline to the 1.1900 region in the next weeks.