GBP/USD pressured on The Times GBP66b loss a year horror story

GBP/USD feeling some weakness here in Tokyo after wires got hold of the news run in The Times how the United Kingdom could lose up to 66 billion pounds a year under a "hard Brexit".

‘Hard Brexit’: UK could shed 9.5% of GDP & lose 66 billion pounds per year

GBP/USD has dropped from 1.2360 to 1.2330 on the back of the article reported in Reuters that was written on the back of leaked government papers.

Of course, there will be government analyses that looks at the worst and best case scenarios before moving inward to a more likely scenario given the argument that the EU will not simply cut Britain off; negotiations will take place regardless how hard lined UK PM is being at the moment:

The worse deal the EU decide to offer in these negotiations to the UK, then the bigger deflationary shock it will be to EU. Germany will be facing huge tariffs on their car exports as just one example and of course many of the central and eastern European nations will push for their privileges to continue. Overall, Britain relies on the EU as much as EU does Britain, but perhaps even less in terms of associated jobs and trade flows.

Either way, the pound is vulnerable and the dollar is benefiting wearing many caps, including a flight to safety and the Fed. The disappointments in the nonfarm payrolls seemed not discourage the hawks and the dollar has been able to rally on a miss of expectations and some observers have their cards down for a rate hike as soon as November. This week will be full of Fed chat and we will be looking out for Yellen especially.

GBP/USD levels

GBP/USD has been oscillating around the 1.2500 mark since the recovery of last week's flash crash, but this article is likely to fuel the bears again that are targetting a break below the 1.23 handle where gravity could come back into effect again. To the upside, 1.2625 comes in as a key resistance while a break of 1.2950 opens 1.3056 late September high of which leaves the outlook bearish otherwise.

How far could Sterling fall?

Analysts at Commerzbank suggested, "Below 1.1938 we would target the 1.0463 1985 low."