GBP/USD crumbles on concerns of a hard Brexit after EU´s draft

• GBP under stress on renewed concerns of a hard Brexit.

• Irish border issue may force the UK to abandon the Brexit path.

GBP/USD is now trading around 1.3788 in the late New York session on Wednesday, down by 0.87% and so far made a low of 1.3770 on the renewed concerns of a hard Brexit after major differences emerged between the UK and the EU regarding various conditions in the exit draft prepared by the European Commission.

In brief, the idea of a soft or an orderly Brexit is looking very remote now on the Irish border issue and under the circumstances, another Brexit referendum can’t be ruled out with a change in government or leadership. Article 50 does make provision for a reverse in the event of a change of government.

Although a no Brexit will be of huge positive for the Sterling, the situation is not there now and the underlying Brexit uncertainty is affecting the currency right now along with ongoing UK political jitters that  cornered British PM Theresa May.

As par Barnier, the agreement on Irish issue must be reached by the autumn and the EU wants to start building a future relationship with the UK as of April,  also preparing for everything including disorderly Brexit.

This contentious issue of  the Irish border is now the primary headwind for a soft Brexit as the UK is against a hard Irish border and Theresa’s key coalition partner DUP (Northern Ireland) termed the EU Brexit draft as constitutionally unacceptable. Meanwhile, the UK government is seeking a solution on the Irish border issue as a part of a wider agreement.

Clearly, GBP is now a victim of politics rather than economics. All eyes are now on May’s EU address on Friday.

Technically, amid all these Brexit squabblings and UK politics, GBPUSD now needs to sustain above 1.3758; otherwise, 1.3677-1.3600 and 1.3457/38-1.3363 may be visible soon. For any recovery, GBPUSD must stay above 1.3899 for an advance to the 1.3973-1.4118 price zone.