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GBP Price Outlook: Bulls Defiant in Face of Brexit, Possible Fitch Downgrade

GBP Price Outlook: Bulls Defiant in Face of Brexit, Possible Fitch Downgrade

2019-02-21 10:00:00
Martin Essex, MSTA, Analyst
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GBP price, news and analysis:

  • Sentiment towards Sterling remains positive, with traders ignoring talk of a disorderly UK exit from the EU.
  • Even a potential downgrade of the UK’s debt rating by the Fitch rating agency has failed to dent confidence in the Pound.
  • The emergence of a new British political grouping is also being shrugged off.

Sentiment towards Pound still positive

Sterling bulls remain in command even though a disorderly Brexit on March 29 remains a distinct possibility – suggesting that the rally over the past week could yet extend further.

GBPUSD Price Chart, Daily Timeframe (October 1, 2018 – February 21, 2019)

Latest GBPUSD daily price chart.

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

British Members of Parliament could be given a vote next week on a revised Brexit deal with the EU, and if UK Prime Minister Theresa May’s proposals are again voted down she will have to choose between a no-deal exit or an extension of the deadline. For now, traders seem to think the latter is more likely – perhaps explaining why GBPUSD is holding its ground.

Fitch warns of possible downgrade

Underlining the positive sentiment towards the pair, it gained ground in early European trading Thursday even though the Fitch credit-rating agency decided late Wednesday to put the UK’s AA credit rating on “negative watch”, warning of a possible downgrade because of the chances of a no-deal Brexit. The statement came as a surprise as it was outside Fitch’s normal rating calendar.

GBPUSD Price Chart, Five-Minute Timeframe (February 21, 2019)

Latest GBPUSD five-minute price chart.

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

There has also been little sign yet that confidence in GBPUSD is being undermined by the emergence of a new political grouping of former Labour Party and Conservative Party MPs, which they are calling the Independent Group.

In theory, its formation makes the chances of May winning support for her deal even less likely, yet even this additional political uncertainty has so far failed to dent trader sentiment.

More to read:

DailyFX Poll: Which Successor to PM May Would be Most Positive for GBP?

Brexit and the Pound: Why EU Might Spurn a Last-Minute Deal With the UK

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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

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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