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GBP/USD. Pound is intimidated by the press: Brexit is fraught with trade war with the European Union and civil strife

The GBP/USD updated its annual low on Tuesday, dropping to 1.3342. The Briton is losing ground despite the hawkish comments from the Bank of England representative and the growth of the manufacturing PMI. Traders actually ignored these important fundamental factors – the GBP/USD bulls could afford only modest corrective growth.

But this was clearly not enough to turn the tide. The pair has been falling for the past three trading days: on Friday, the price entered a steep peak and still cannot get out of it. And it's not just about the general strengthening of the greenback. The pound sterling is falling in price "independently" - both in tandem with the dollar and in many cross-pairs. As we remember, the pound very successfully resisted the dollar bulls, against the backdrop of the hawkish intentions of the British regulator.

On the eve of the November meeting of the Bank of England, the sterling traded in the area of 37-38 figures, despite the onslaught of the American currency. Of all the major group currency pairs, only the GBP/USD pair could afford such a luxury. But the British regulator did not live up to the hawkish hopes and did not raise the interest rate by 15 basis points. BoE Governor Andrew Bailey took a wait-and-see attitude while allowing the implementation of a hawkish scenario in the foreseeable future.

Note that some members of the Bank of England continued to stir up interest in the pound after the November meeting, hinting at the strengthening of hawkish sentiment in the Central Bank camp. But the pound stopped responding to such remarks, completely "switching" to another topic.

The echoes of Brexit do not allow the pound sterling to keep on the defensive, holding back the onset of dollar bulls. The pound demonstrates vulnerability, allowing sellers of GBP/USD to control the situation on the pair. Buyers tried to launch a counteroffensive on Friday and returned to the 34th figure area. But at the same time, they could not stay above 1.3400.

As a result, the bears were able to enter sales at a better price, thereby strengthening the downside impulse. This situation has been observed since last Friday. Any more or less large-scale corrective pullback attracts sellers who are pulling the price down with renewed vigor.

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Last Friday, the negotiations on the so-called Northern Ireland issue had failed. The parties tried to put "a good face on a bad game," but were forced to admit that they were never able to come to a compromise during the negotiations even on the most important issues. London is still pushing for a revision of the Northern Ireland Protocol (which is an integral part of Britain's secession from the EU), and Brussels is still not ready to take such a step. Earlier, representatives of the Boris Johnson government made it clear that they can use the 16th article of the protocol, which implies the introduction of so-called "protective measures" unilaterally. According to experts, we are talking about the unilateral suspension of all trade obligations that were provided for by the document.

Commenting on the results of the failed negotiations, European Commission Vice President Maros Sefcovic refused to answer a question from journalists about a possible response from Brussels to the application of Article 16 by London. He again repeated the hackneyed phrase that the main goal of the European Union is to solve the problem through negotiations.

Meanwhile, the European press is escalating the tension, claiming that Brexit is fraught with a trade war with the European Union and civil strife in Northern Ireland. Journalists remind that a bloody ethnopolitical conflict took place on the island of Ireland for half a century - the rebel forces sought the secession of Northern Ireland from the Kingdom, followed by annexation to the Republic of Ireland.

According to various estimates, about four thousand people died during this long-running conflict. A truce was reached only in 1998, when the parties entered into the "Belfast Agreement". The main points of this agreement state that the Northern Irish separatists renounce their territorial claims, and London, in turn, introduces local self-government and parliamentarism in this region.

In addition, the "Belfast Agreement" eliminated the border between Northern Ireland and the Republic of Ireland. Therefore, the current issue of the Irish border is considered not only in terms of economic and customs barriers, but also in terms of political consequences.

Negotiations between London and Brussels have not been formally completed - but after the announcement of Friday's interim results, it became clear that further escalation of the trade and political conflict was inevitable. Again, here you can recall the events of this spring, when protests against the Northern Ireland Protocol were held in a number of cities in Northern Ireland. These protests subsequently escalated into riots and clashes with the police. Concerns about a repetition of this scenario weighs on the pound, especially against the background of the negotiation deadlock.

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At the same time, the US dollar index again renewed its multi-month record on Friday, reaching 96.60 (the highest since July last year). The persisting hawkish expectations allow the dollar bulls to control the situation in all currency pairs of the "major group" - including the pair with the pound.

All this suggests that corrective pullbacks for the GBP/USD pair can be used to open short positions. Neither the record rise in British inflation, nor the hawkish hints of the of the BoE representative Jonathan Haskel were able to reverse the downside trend. The pound moves in the greenback's fairway, which continues to gain momentum. The main target of the downward movement is 1.3300 - this is the lower line of the Bollinger Bands indicator on the D1 timeframe.

The material has been provided by InstaForex Company - www.instaforex.com