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STERLING: POV: GBPDEM: A Message for EURGBP Chart: http://tinyurl.com/MNI-GBPDEM
Following the release of the draft Brexit text and the resignation of Brexit
Secretary Dominic Raab, we have looked at the long-term technical position of
- GBPDEM has a longer history than EURGBP and was actively traded rather than
the synthetic euro often used in EURGBP charts prior to 1999.
- GBPDEM has been on a long-term downtrend since the mid-1980s (a long-term
uptrend in EURGBP). Throughout that time any sterling corrections higher have
been very weak. This points to a weak technical outlook for GBPDEM.
- The shorter-term uptrend in GBPDEM was broken immediately following the Brexit
referendum in June 2016.
- Seasonals also are not supportive for sterling. Since the introduction of the
euro in 1999, EURGBP has moved higher in the two-month period of Nov-Dec 12 out
of 19 times, and in December alone EURGBP has moved higher 13 out of 19 times.
- A no deal Brexit could see EURGBP move to multiyear highs of 0.98, last seen
in the depths of the financial crisis.