Sterling buyers are preparing for ‘Meaningful Vote Round three’.
100-odd pips have been trimmed from GBP/USD nine-month highs and similar off EUR/GBP's two-year best. That’s ‘cruise control’ relative to this week’s gyrations, the biggest since 2017. But it’s a sign that despite slumping hedging demand, market sangfroid only goes so deep.
High probability of another Brexit deal defeat does not preclude more harsh trading conditions. The market, like Westminster, doesn’t quite know what it believes: Friday’s open was below Thursday’s close. As the old American saying goes: ‘stand for something, or you’ll fall for anything’. So will sterling. Partly because it’s difficult to project a clear view from Parliament next week, even after the government’s ultimatum to expect “a significantly longer” extension if the deal is voted down again.
The EU’s 21st-22nd March summit, which is unlikely to re-open backstop discussions, will be followed by a way-finder vote days before Britain’s planned exit. 3D impenetrability means the pound can’t stay on cruise control for long.
Chart thoughts: GBP/USD
- Settles into a $1.3340-$1.3094 range, though the destruction of a 48-hour uptrend in itself reflects the end of optimal conditions for bulls
- That said, so long as the range is intact, logically, drama will be limited
- Possible incursions above the topside are hinted at by short-term up-creep by shorter and medium-term oscillators
- Over the short horizon, offers will be more intense at Thursday’s $1.333 intermediate peak, reducing odds of another look at the $1.3383 top
- Below $1.3094 would herald extended downside
Price chart: sterling/U.S. dollar - hourly
Source: Refinitiv/City Index
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.