GBP Weekend Gap at Risk on Brexit Update, Eyes Carney Speech Next
- GBP gapped up versus its major peers, responding to Theresa May’s “soft Brexit”
- However, its upside momentum soon reversed after UK Brexit Secretary Davis resigned
- Key economic data and a new Brexit Secretary may further influence the British Pound
Find out what retail traders’ British Pound buy and sell decisions say about the coming price trend!
The British Pound fell against the US Dollar after UK Brexit Secretary David Davis resigned early into Monday’s Asia Pacific trading session. This reversed most of Sterling’s weekend upside gap against its major counterparts, which was in response to Prime Minister Theresa May’s “soft Brexit” economic plan that the divided Cabinet agreed upon.
GBP/USD 1-Hour Chart
Mrs. May’s soft Brexit plan would entail a UK-EU free-trade area, following EU rules for goods trade and avoiding tariffs and border checks. It was seen as a victory for the Prime Minister, after struggling to lead a pro-Brexit Cabinet. In addition, the UK’s main business lobby, the Confederation of Industry, praised the proposal.
However, Brexit Secretary David Davis made his opposition to the plan known and followed through on threats of resignation, stating that May’s government would be less likely to execute its “manifesto commitment to leave the Customs Union and the Single Market”. In addition, his deputy Steve Baker also resigned.
Their resignations and the ensuing political uncertainty may have hindered the Sterling’s upward momentum. From here, Davis’s and Baker’s actions could have the potential to threaten Theresa May’s standing as Prime Minister if there are attempts made to oust her. In addition, these chain of events may inspire hard-Brexit lawmakers to retaliate.
GBP/USD 5-Minute Chart
Looking forward, this is a week of high economic activity for the British Pound. Prime Minister May’s office will be announcing a newly appointed Brexit Secretary on Monday, and on Tuesday the UK Statistics Office releases their first monthly estimate of GDP.
Furthermore, Bank of England Governor Mark Carney is set to give a speech on Thursday. His positive comments and an increasingly hawkish BoE have increased the probability of a rate hike at their August 2nd meeting. According to overnight index swaps, this probability now stands at 80 percent.
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--- Written by Daniel Dubrovsky, Junior Currency Analyst, and Megha Torpunuri, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.