GBP Coiled Ahead of Make-or-Break Brexit Speech
- UK PM May’s speech is expected to include a financial offer to the EU to help kick-start trade talks.
- EU Barnier reiterates that the future of the Union is his priority, not Brexit.
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UK PM Theresa May will deliver a speech to an audience of dignitaries in Florence later today which is expected to include a financial ‘divorce bill’ offer of around £18-20 billion to help break the current impasse with the European Union. The speech is also expected to update the UK’s position on the Northern Ireland border issue and the respective rights of UK and EU citizens. The speech may however fall on deaf ears after EU chief negotiator Michel Barnier last night said that the future of the EU is his priority, and not Brexit.
The expected offer by PM May is likely to be rejected with the EU looking for a much higher figure, between EUR60-100 billion, when Britain leaves the EU. The problem that the Prime Minister also faces is at home with some members of her cabinet openly saying that Britain should not pay a penny when we leave the EU in March 2019. And it is this impasee that could cause GBP/USD to move sharply, one way or the other, with any agreement boosting the value of GBP while a continued stand-off could see GBP fall sharply.
GBP/USD is currently stuck in a rut, waiting for the PM’s speech. No official time has been announced for the speech, which may happen during European trading hours or not, leaving traders sidelined. For now, politics is the main driver ahead of GBP, ahead of monetary policy, which leaves the market looking for headlines to drive moves.
DailyFX trading instructor Jeremy Wagner looked at the latest GBP/USD technicals here.
Chart: GBPUSD One Hour Timeframe (September 22, 2017)
Retail trader data shows 29.0% of traders are net-long with the ratio of traders short to long at 2.45 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29292; price has moved 5.1% higher since then. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias
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--- Written by Nick Cawley, Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.