GBP in the Spotlight as Brexit Tensions Flare up
Sterling and Brexit News and Talking Points
- Discussions over the Northern Ireland hard border has caused a major rift in the UK cabinet.
- Sterling likely to come under selling pressure if no government resolution is found.
The IG Client Sentiment Report shows that traders are just under 72% long GBPUSD – a bearish contrarian signal. However, the combination of current sentiment and recent changes gives us a further mixed GBPUSD trading bias.
Sterling Faces a Potential Brexit Backlash
News late Wednesday of a major row between PM Theresa May and Brexit minister David Davis over the government’s final position on a backstop for Northern Ireland could weigh on Sterling in the days to come if no agreed position is found. Brexit minister Davis is seeking a firm end date for the customs union plan while PM May prefers an open-ended arrangement when the UK leaves the EU. Press reports have said that David Davis may resign if no firm end-date is agreed.
Brexit minister Davis added fuel to the fire say Wednesday that “the Prime Minister has already made public the fact that we expect to put a time-limit on the backstop proposal”, heaping pressure on the Prime Minister for clarity on the matter. The EU withdrawal bill returns to the House of Commons on June 12 with the government looking to overturn several House of Lords amendments.
The British Pound has pulled back from recent multi-month lows against the US dollar, but this recovery may come under pressure as Brexit negotiations again take center-stage. If there is no clear resolution, or if David Davis quits his role, Prime Minister Theresa May’s position may become untenable and leave the UK weakened ahead of the European Council meeting on June 28-29.
GBPUSD is currently showing no signs of any reaction to the ongoing Brexit talk, currently trading around 1.34500. On the downside support comes in around 1.3300 before the recent six-month low of 1.3204 comes into play.
GBPUSD Daily Price Chart (September 25, 2017 – June 7, 2018)
--- Written by Nick Cawley, Analyst
To contact Nick, email him at email@example.com
Follow Nick on Twitter @nickcawley1
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.