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GBP Price: Upward Trend May Continue After Brexit Vote

GBP Price: Upward Trend May Continue After Brexit Vote

2019-01-15 10:30:00
Martin Essex, MSTA, Analyst
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GBP price, news and analysis:

  • British members of Parliament will vote on UK Prime Minister Theresa May’s proposed Brexit deal with the EU after 1900 GMT Tuesday and are expected to reject it by a wide margin.
  • However, GBPUSD could still rise.
  • While gyrations are likely after the vote, note that the Pound’s one-month implied volatility is well below its levels in 2016 when the British voted to leave the EU in a referendum.

GBPUSD outlook positive after Brexit vote has taken place

UK Prime Minister Theresa May’s proposed Brexit deal with the EU will almost certainly be voted down by the UK House of Commons – the elected house of Parliament – Tuesday evening but that will not necessarily be bad news for the British Pound.

The so-called “meaningful vote” will take place after 1900 GMT and could be some hours later because amendments have to be voted on first. The best guess is that it will take place between 2000 and 2100 GMT – in the quiet period for FX trading between the end of business in New York and the start in Asia.

That could mean substantial gyrations in GBPUSD but note that GBP one-month implied volatility remains well below the peaks reached in June 2016 when the British public voted in a referendum to leave the EU.

CBOE/CME FX British Pound Volatility Chart, Weekly Timeframe (March 7, 2016 – January 15, 2019)

Latest GBP volatility chart.

Source: Investing.com (You can click on it for a larger image)

The problem for GBP traders is that almost anything could happen after the vote, including the replacement of May as Prime Minister by her own Conservative Party, a general election, a second referendum, leaving the EU on March 29 without a deal or a postponement of that March deadline. That could mean only a limited response in Sterling.

As one opposition member of Parliament said Monday, perhaps we all might as well wait to see whether a mermaid riding a unicorn will happen by and provide a solution.

That means that in essence the vote could leave wide open the possibilities of positive or negative GBP outcomes so the currency could well continue the climb that started on December 12, driven up by the positive technical picture rather than by the fundamentals.

GBPUSD Price Chart, Daily Timeframe (September 17, 2018 – January 15, 2019)

Latest GBPUSD price chart.

Chart by IG (You can click on it for a larger image)

More to read:

How the Brexit Vote Will Impact the FTSE 100 and FTSE 250

Sterling (GBP) Technical Outlook: GBPUSD, EURGBP, GBPNZD

Brexit Analysis: How GBP & Stocks Might React to Alternative Outcomes

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--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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