Brexit Latest: Sterling (GBP) Struggles as PM May Heads to Brussels
Brexit Latest: News, Updates and Sterling Technical Analysis
- Market expectations are very low as PM May goes to Brussels.
- Sterling slips through support and now looks for a new base.
Sterling’s (GBP) Conflict as Brexit Indecision Takes its Toll
UK Prime Minister Theresa May will speak later with European officials to try and persuade the EU to drop its demands on the Irish backstop to prevent a hard border between Northern Ireland and Ireland. PM May’s demands however will likely fall on deaf ears and she will return to Parliament with nothing new to offer the divided house. The EU’s frustration at the ongoing Brexit impasse came into full view yesterday when European Council President Tusk said - and then tweeted - that he had been wondering ‘what that special place in hell looks like for those who promoted Brexit without even a sketch of a plan how to carry it out safely’.The pointed barb provoked an angry reaction from prominent Brexiteers and will make further UK/EU meetings even more acrimonious at a time when cool heads are needed.
Next week’s vote in Parliament may only be amendments, according to media sources, with the vote on the Withdrawal Agreement now delayed until the end of February. This constant can-kicking and indecision is starting to wear down even the most hardened Sterling bulls. GBPUSD is now trading either side of 1.2900 on a combination of Brexit worries and US dollar strength, while Sterling remains on edge across a range of currencies.
Later today the latest Bank of England MPC meeting and Quarterly Inflation Report are released with market fully expecting no change in policy measures. The QIR report may downgrade UK inflation expectations although a strong UK job market, and multi-year high wage growth, may stoke fears of domestic inflation in the next few months.
GBPUSD Daily Price Chart (March 2018– February 7, 2019)
IG Retail Sentiment data shows clients are 58.1% net-long GBPUSD, a bearish contrarian indicator. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPUSD bearish contrarian trading bias.
--- Written by Nick Cawley, Analyst
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