Sterling Ignores EU/UK Brexit Deal as Challenges Increase
Sterling and Brexit
- Sterling little moved on Brexit news.
- Risks remain to the downside in the short-term.
We have just released our Brand New Q4 Trading Forecasts including USD and GBP.
UK PM May to Try and Sell Her Brexit Deal
The UK PM will spend the next couple of weeks trying to sell her Brexit deal to the UK public and, more importantly, the UK Parliament, warning that it is the best deal possible and that any other versions would hurt the UK economically. The vote in the House of Commons is expected the w/c December 10 and is expected to be rejected in its current state. This would make the PM’s position increasingly vulnerable, opening up a range of alternatives including an amended Brexit deal, a Conservative leadership contest, a second referendum or a general election. In the run-up to any of these options, Sterling would be at risk of a sharp move lower, as confidence in the UK ebbs away. The media is expected to be full of Brexit scare stories, from both sides of the House in the next couple of weeks, with Brexiteers angry at the current proposal, while Remainers continue to keep the UK within the EU, keeping Sterling (GBP) volatility high.
A deal between the EU and UK was supposed to have given Sterling a healthy boost, but the apathy towards PM May’s deal is clearly shown in GBPUSD this morning. The pair have edged mildly higher, currently +0.18% at 1.28370, although most of that increase is due to the weakness in the US dollar, with the USD basket currently -0.22% at 96.19. Retail remain heavily long GBPUSD, with trader net-longs at 71.5%, a bearish contrarian set-up. In addition, traders are further net-long on a daily and weekly basis, giving us a stronger GBPUSD contrarian trading basis.
The daily GBPUSD chart highlights the pair trading down towards recent support around 1.2780 to 1.2800 area which currently protects horizontal support at 1.2724 and 1.2696. Below here, 1.2662 comes into play, a 17-month low. On the upside there is resistance at 1.2916 (20-day ma) and 1.2922 before 1.2974 (50-day ma).
GBPUSD Daily Price Chart (March – November 26, 2018)
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