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What Does Brexit Mean for the GBP/USD? |
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16th Dec 2020

What Does Brexit Mean for the GBP/USD?

Article Table of Contents:

It was in June 2016 that the UK voted to leave the European Union. It has been more than 4 years since then, and still uncertainties surround Brexit. Discussions, debates, hung negotiations and extensions have marked this period. After officially leaving the EU on January 1, 2020, the 2 parties agreed to a deadline of December 31, 2020 to reach a trade agreement. But after plenty of debate between lawmakers and officials, there still is no consensus on a trade deal. 

Deal or No Deal?

It is emerging that the most likely outcome could be a no-deal Brexit, with Boris Johnson stating that a no-del Brexit was “very, very likely.” This is believed to be the consensus, after both Angela Merkel and Emmanuel Macron outrightly rejected Johnson’s appeals for direct discussions. The European Commission’s president, Ursula von der Leyen, also said that she believed chances were high that no agreement would be reached by the December 31 deadline.
The largest stumbling block in the agreements between the two parties have been about maintaining a “level playing field.” The UK wants to have a zero-tariffs, zero-quotas free trade deal with the European Union. But the UK does not want to agree to the same regulatory standards as the EU on environment and labour. 

One such major issue has been fisheries, which account for around 0.12% of the economic output of the UK. EU-based fishing boats capture around 8 times more fish in UK waters as UK fleets do in the EU waters. To control this, Boris Johnson wants quotas on EU fishermen. But Emmanuel Macron remains strictly opposed to this.  

Impact of a No-Deal Brexit on the GBP/USD

The first step to preventing emotions from colouring trading decisions is to follow a robust trading plan. A trading plan is like a map for your journey. For this, you need a clear idea of your goals before you start trading. Also, consider your personality traits, biases and emotions when building a trading plan. The trading plan should also include your time commitments, funds available for trading and your risk appetite.  
Based on this information, you can create a strategy that helps you identify when to open and close trades. Sticking to the plan helps take emotions out of decision making. This can be great, especially in situations when you have recently suffered a loss and may have lost confidence. On the other hand, a big win could make you overconfident.