Markets.com Logo
euEnglish
LoginSign Up

FX update: Pound blown off course by Frosty Brexit talks, euro tests 200-day line

May 27, 2020
4 min read
Table of Contents

    Sterling got a smack and the euro pulled back from its highs of the day as Britain’s chief Brexit negotiator confirmed what we already knew; that UK-EU talks are not going very well at all. Whilst a classic last-minute EU fudge is still broadly anticipated by the market, the language from David Frost was not optimistic.

    GBPUSD moved sharply off the 1.23 handle, turning lower to test 1.2250 before paring those losses. EURGBP pushed higher and looked towards the May 21st swing high at 0.90, a two-month peak. Undoubtedly sterling becomes increasingly exposed to headline risks around Brexit as we move out of the worst of the Covid-19 pandemic and back into the cut-and-thrust of negotiations.

    Speaking to MPs, Frost said the EU’s current mandate handed to chief negotiator Michel Barnier is – in certain key areas –  not likely to produce an agreement, adding that the EU must change its stance in order to reach a deal with the UK. He said that the policy enshrined in the EU’s mandate is not one that can be agreed by the UK. Interesting to see sterling come back a touch as Mr Frost said it’s still the early stages of talks and the UK is still setting out its position – this seems rather optimistic given the timelines previously mentioned.

    Whilst we knew that there had been precious little progress in the latest round of talks, the language indicates the two sides are very far apart still. We should however note that adopting this tone is part of the game – the UK’s position remains to take a hard line and, with Mr Cummings still in place, I would think this will remain the case. When questioned, Mr Frost said he reports to the PM, not to Mr Cummings. Of course, we all know where the real power lies.

    As previously noted time is running out fast for the talks and we become less sure that either side has the political will and capital to expend on this when dealing with the economic catastrophe of the pandemic. The EU focus is on sorting out a rescue fund that all members can sign up to. Political capital is being spent on that more readily.

    Chatter around the Bank of England looking at negative rates is another weight on sterling right now. Indeed it’s a crossroads moment as we deal with a massive increase in government debt, run huge twin deficits and exit the EU whilst in the midst of the worst global recession since the 1930s. There are a lot of downside risks for GBP.

    Chart: Pound under pressure: EURGBP moves up to test near-term resistance, GBPUSD drops sharply

    Meanwhile, EURUSD also pulled back from its highs, before recovering the 1.10 handle. The euro had earlier moved higher and European equities extended gains after the European Commission laid out plans for an additional €750bn stimulus fund. Ursula von der Leyen set out plans to distribute €500bn in grants – as per the Franco-German proposals – with an additional €250bn in loans on top. She said this would take the EU’s total recovery fund to €2.4 trillion.

    A German government spokesman said Berlin was happy the EU had taken up elements of the plans set out last week by Angela Merkel and Emmanuel Macron. Macron urged the EU to move forward quickly. But a Dutch official said budget talks would ‘take time’, indicating a still rather frosty approach to the rescue fund from certain corners – it’s far from a done deal.

    Chart: EURUSD analysis

    The EC plans took the cross through the 200-day simple moving average around 1.1010 but there was not an immediate follow-through and the Brexit chatter knocked it back before it retook the 200-day line. Bulls need to see a confirmed push above this to unlock the path back to 1.1150, the March swing high. Failure calls for retest of recent swing lows at 1.0880.


    Risk Warning: this article represents only the author’s views and is for reference only. It does not constitute investment advice or financial guidance, nor does it represent the stance of the Markets.com platform.When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice. Trading cryptocurrency CFDs and spread bets is restricted for all UK retail clients. 

    Written by
    SHARE

    Markets

    • Palladium - Cash

      chartpng

      --

      -2.65%
    • EUR/USD

      chartpng

      --

      -0.04%
    • Cotton

      chartpng

      --

      -0.31%
    • AUD/USD

      chartpng

      --

      -0.31%
    • Santander

      chartpng

      --

      -1.88%
    • Apple.svg

      Apple

      chartpng

      --

      -0.63%
    • easyJet

      chartpng

      --

      2.16%
    • VIXX

      chartpng

      --

      3.76%
    • Silver

      chartpng

      --

      -1.31%
    Table of Contents

      Related Articles

      Bank of England BoE

      Week Ahead: Interest Rate Decisions from BoE in Focus

      Several key economic releases are scheduled for the week of 4 – 8 August 2025. On Monday, 4 August at 0630 GMT, Switzerland will release its CPI m/m data, with June showing a +0.2% rise and July expected to remain steady.

      Tommy Yap|in 2 days

      US Envoy Meets Netanyahu Amid Rising International Pressure on Gaza Aid

      US Envoy Witkowsky engages in talks with Netanyahu about Gaza's future amid increasing global pressure. Stalled negotiations and efforts to recognize a Palestinian state dominate the scene.

      Noah Lee|about 3 hours ago

      Trump Escalates Criticism of Powell After Fed Rate Decision

      President Trump escalates his criticism of Fed Chairman Powell, expressing dissatisfaction with the decision to hold interest rates steady and warning of economic repercussions.

      Emma Rose|about 4 hours ago
      Markets.com Logo
      google playapp storeweb tradertradingView

      Contact Us

      support@markets.com+12845680155

      Markets

      • Forex
      • Shares
      • Commodities
      • Indices
      • Crypto
      • ETFs
      • Bonds

      Trading

      • Trading Tools
      • Platform
      • Web Platform
      • App
      • TradingView
      • MT4
      • MT5
      • CFD Trading
      • CFD Asset List
      • Trading Info
      • Trading Conditions
      • Trading Hours
      • Trading Calculators
      • Economic Calendar

      Learn

      • News
      • Trading Basics
      • Glossary
      • Webinars
      • Traders' Clinic
      • Education Centre

      About

      • Why markets.com
      • Global Offering
      • Our Group
      • Careers
      • FAQs
      • Legal Pack
      • Safety Online
      • Complaints
      • Contact Support
      • Help Centre
      • Sitemap
      • Cookie Disclosure
      • Awards and Media

      Promo

      • Gold Festival
      • Crypto Trading
      • marketsClub
      • Welcome Bonus
      • Loyal Bonus
      • Referral Bonus

      Partnership

      • Affiliation
      • IB

      Follow us on

      • Facebook
      • Instagram
      • Twitter
      • Youtube
      • Linkedin
      • Threads
      • Tiktok

      Listed on

      • 2023 Best Trading Platform Middle East - International Business Magazine
      • 2023 Best Trading Conditions Broker - Forexing.com
      • 2023 Most Trusted Forex Broker - Forexing.com
      • 2023 Most Transparent Broker - AllForexBonus.com
      • 2024 Best Broker for Beginners, United Kingdom - Global Brands Magazine
      • 2024 Best MT4 & MT5 Trading Platform Europe - Brands Review Magazine
      • 2024 Top Research and Education Resources Asia - Global Business and Finance Magazine
      • 2024 Leading CFD Broker Africa - Brands Review Magazine
      • 2024 Best Broker For Beginners LATAM - Global Business and Finance Magazine
      • 2024 Best Mobile Trading App MENA - Brands Review Magazine
      • 2024 Best Outstanding Value Brokerage MENA - Global Business and Finance Magazine
      • 2024 Best Broker for Customer Service MENA - Global Business and Finance Magazine
      LegalLegal PackCookie DisclosureSafety Online

      Payment
      Methods

      mastercardvisanetellerskrillwire transferzotapay
      The markets.com/za/ site is operated by Markets South Africa (Pty) Ltd which is a regulated by the FSCA under license no. 46860 and licensed to operate as an Over The Counter Derivatives Provider (ODP) in terms of the Financial Markets Act no.19 of 2012. Markets South Africa (Pty) Ltd is located at BOUNDARY PLACE 18 RIVONIA ROAD, ILLOVO SANDTON, JOHANNESBURG, GAUTENG, 2196, South Africa. 

      High Risk Investment Warning: Trading Foreign Exchange (Forex) and Contracts For Difference (CFDs) is highly speculative, carries a high level of risk and is not appropriate for every investor. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin. Please read the full  Risk Disclosure Statement which gives you a more detailed explanation of the risks involved.

      For privacy and data protection related complaints please contact us at privacy@markets.com. Please read our PRIVACY POLICY STATEMENT for more information on handling of personal data.

      Markets.com operates through the following subsidiaries:

      Safecap Investments Limited, which is regulated by the Cyprus Securities and Exchange Commission (“CySEC”) under license no. 092/08. Safecap is incorporated in the Republic of Cyprus under company number ΗΕ186196.

      Markets International Limited is registered  in the Saint Vincent and The Grenadines (“SVG”) under the revised Laws of Saint Vincent and The Grenadines 2009, with registration number  27030 BC 2023.

      Close
      Close

      set cookie

      set cookie

      We use cookies to do things like offer live chat support and show you content we think you’ll be interested in. If you’re happy with the use of cookies by markets.com, click accept.