Currency Analyst since 2010

GBP/USD: outlook for June 27 - July 3

GBP/USD fell to more than 30-year lows on the results of the UK referendum. 52% British people voted to leave the European Union, while 48% wanted the nation to remain in the EU. Voter participation was over 72%, and the lead of the Brexit supporters was 1.26 million votes.

Britain is expected to make a formal announcement to the EU at the European Council meeting on Monday, June 27. British Prime Minister David Cameron will take part in this meeting, but said that he will resign by October. According to Cameron, Britain needs ‘new leadership’ for further negotiations with Europe. The process of Brexit should take 2 years.

Leaving the EU could cost Britain access to the EU’s single market, so it will have to seek new trade accords with countries around the world. In the long term the size of negative impact on British economy will depend on whether Britain manages to reach many new partial economic agreements with the EU or not. It seems that the European Union will take a hard stance on dealing with Britain: the EU heads Juncker and Tusk said in the joint statement that Europe expects UK to move on Brexit as soon as possible.

In the shorter term British firms will be affected by uncertainty, and that will likely make the UK economic growth falter in the second half of 2016. Traders will fear that the vote results will hit investment to British economy. In addition, one of the main problem now is the split in British society. Scotland and Northern Ireland voted to stay in the EU, and now their authorities announced that there is now an opportunity for these regions to leave the United Kingdom.

The market’s fears eased a bit as the Bank of England’s Governor Mark Carney offered to provide more than 250 billion pounds plus “substantial” foreign currency liquidity and it was ready to take additional measures if needed. However, it’s still clear that there’s more uncertainty ahead for the British pound.

There will be more volatility in GBP/USD next week as traders and investors try to adjust to the new reality. Support is at 1.3520 and 1.3300. Resistance is at 1.3880 and 1.4150. 

Scroll to top