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GBPUSD to Remain Firm as Brexit Bill Heads for House of Lords

GBPUSD to Remain Firm as Brexit Bill Heads for House of Lords

2018-01-17 15:47:00
Martin Essex, MSTA, Analyst
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GBPUSD Talking Points

- Later today, the UK Parliament’s House of Commons is likely to pass the EU Withdrawal Bill designed to pave the way to Brexit.

- That could give a further boost to GBPUSD, which has strengthened in five of the past six sessions.

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Brexit Bill to be passed by House of Commons

Barring accidents, the European Union (Withdrawal) Bill will be passed by the UK Parliament’s elected House of Commons around 1900 GMT today and sent on to the House of Lords, smoothing the path towards Brexit. As the unelected upper house is seen as broadly more pro-EU than the lower house, that could raise hopes of a “soft” Brexit that would be less damaging for the British Pound than the “hard” Brexit that would take place if the UK and the EU failed to agree a friendly divorce.

If the Bill passes as expected, despite Opposition resistance, it should underpin GBPUSD, which has advanced from a low of 1.3457 last Friday to 1.3800, up in five of the past six daily sessions and now back to its strongest since June 24, 2016, the day after the British voted for Brexit. The Bill repeals the 1972 law that brought the UK into the EU and transfers EU law into British law.

GBPUSD Price Chart Daily Timeframe (January 2, 2017 to January 17, 2018)

GBPUSD to Remain Firm as Brexit Bill Heads for House of Lords

Chart by IG

Brexit impact on GBPUSD

While GBPUSD will likely continue to react more to interest rate expectations than Brexit developments, members of the House of Lords are expected to try to soften the impact of EU withdrawal by pressing for the UK to remain in the EU single market or for a second Brexit vote.

They may well fail but the currency pair could still benefit as the March 29, 2019 leaving date approaches. UK/EU talks about the so-called “transition period” are expected to start later this month, with trade negotiations following after an EU summit at the end of March. While IG Client Sentiment data are currently sending a bullish signal, though, it’s worth noting that the 1.40 level could provide important psychological resistance.

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

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