Once again, the political stories on the Brexit event are making the news and the next developments are expected to influence life for people in several different countries around the world. Needless to day, these potential changes could be significant for the political structure of the world economy. For many people, one of the most direct ramifications will be seen if Brexit impacts exchange rates between the euro currency and the British pound.
Soon, we should have some additional clarification about where all of the Brexit events are heading. The United Kingdom recently. Potential changes in policy are now more apparent, given the fact that Boris Johnson has outmatched Jeremy Hunt to become the new Conservative party leader succeeding Theresa May as Prime Minister.
However, some analysts are preparing for a no-deal outcome as a result of all the talks concerning the Brexit event, if this occurs it is likely that the world economy could experience unforeseen surges in market volatility. Therefore, depending on the ways the entire Brexit situation unfolds, the world could be in for some challenging times as each country involved looks to assess the new world order.
In the past, all of the chaos surrounding Brexit talks and negotiations made it very difficult to predict where the price of sterling was heading. The GBP is a currency major that is used in a large number of world business transactions and this makes the currency a vita component of regular transactions in the world economy.
In particular, there could be major influences seen in the value of the EUR and GBP exchange rate, given the fact that these are the two economic regions that would be most directly impacted by a no-deal outcome for the Brexit talks. The could also be major influences seen in the relative values of the GBP and the U.S. dollar exchange rates.
As things stand currently, the pound has shown weakness against some of the major currencies like the U.S. dollar. Largely, this is because the situation still remains unresolved. It seems that the only remedy that could completely heal downward changes in the British pound would be if the Brexit event doesn’t happen at all. However, this is a potential outcome that doesn’t appear to be likely now that Boris Johnson (a Leave vote supporter) has become the prime minister.
In the recent data reports, Eurozone trade balance figures have been coming in stronger than expected with trend averages at 23 billion euros (against 15.9 billion euros expected) which is one of the highest levels seen in the last year.
The data came in conjunction with the recent U.K. Right Move Housing report, which shrank for the first time this year with declines £309,000. This is an important data report because Brexit issues are once again making headlines in the financial news and because housing prices tend to be a primary indicator of where inflation is headed in the region.
These factors have influenced valuations in the EUR/GBP currency pair, which is currently showing very strong rallies:
Daily charts in the EUR/GBP show valuations that are starting to look attractive for CALL options, as the currency pair is dealing with bullish indicator divergences while trading in close proximity to prior resistance levels. Values in the euro could weaken if the European Central Bank signals an added need for monetary stimulus but a clear break of near term resistance levels could lead to further upside extensions in the EUR/GBP currency pair.
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