Fundamental Analysis
We had a cross over on the MACD in April followed by a breakout in the channel in the following weeks, which resulted in the bears gaining momentum in GBPUSD.
GBP plummeted below the previous year-to-date low of 1.3205 yesterday and hit 1.3151. The break of the channel suggests that GBP has reentered a bearish phase. However, after the sharp decline last month, indicators have to fully unwound and any weakness from here is likely to be grinding and last November’s low of 1.3040 is likely out of reach this time round (1.3100 is already a strong support). That said, the outlook for GBP is deemed as bearish until the ‘stop-loss’ at 1.364 is taken out.
Fundamental Analysis
A showdown in the UK parliament today over Brexit policy is keeping sterling on the backfoot and it could be in for a potential rollercoaster ride if the government loses the knife-edge vote on its Brexit plans nL8N1TL3NV. The opposition Labour party has urged its MPs to vote against the government so PM May's proposal risks defeat if just a handful of her Tory MPs side with the opposition. The pound, which has been sold lately as Brexit worries compound concerns about low UK growth, could suffer a knee-jerk drop if the government is defeated as this will damage May and generate UK political uncertainty. That may result in a change at the top of the British government and/or another general election before Britain's scheduled EU exit in March 2019. The silver lining for sterling from a government defeat is that it would tee up the option of a 'soft Brexit' (if MPs were to reject any deal negotiated between the EU and UK or there is no deal). The general perception in the FX market is that the softer the Brexit, the better it would be for sterling
Conclusions
All eyes on the BOE England tomorrow as the whole world watches Sterling and its uncertain future as it slowly stumbles towards a cliff edge. Almost no chance for an interest rate hike tomorrow, while investors continue to stay away from U.K Equities and Sterling due to continued uncertainty with the Conservative governments continued failed Brexit proposals.
We had a cross over on the MACD in April followed by a breakout in the channel in the following weeks, which resulted in the bears gaining momentum in GBPUSD.
GBP plummeted below the previous year-to-date low of 1.3205 yesterday and hit 1.3151. The break of the channel suggests that GBP has reentered a bearish phase. However, after the sharp decline last month, indicators have to fully unwound and any weakness from here is likely to be grinding and last November’s low of 1.3040 is likely out of reach this time round (1.3100 is already a strong support). That said, the outlook for GBP is deemed as bearish until the ‘stop-loss’ at 1.364 is taken out.
Fundamental Analysis
A showdown in the UK parliament today over Brexit policy is keeping sterling on the backfoot and it could be in for a potential rollercoaster ride if the government loses the knife-edge vote on its Brexit plans nL8N1TL3NV. The opposition Labour party has urged its MPs to vote against the government so PM May's proposal risks defeat if just a handful of her Tory MPs side with the opposition. The pound, which has been sold lately as Brexit worries compound concerns about low UK growth, could suffer a knee-jerk drop if the government is defeated as this will damage May and generate UK political uncertainty. That may result in a change at the top of the British government and/or another general election before Britain's scheduled EU exit in March 2019. The silver lining for sterling from a government defeat is that it would tee up the option of a 'soft Brexit' (if MPs were to reject any deal negotiated between the EU and UK or there is no deal). The general perception in the FX market is that the softer the Brexit, the better it would be for sterling
Conclusions
All eyes on the BOE England tomorrow as the whole world watches Sterling and its uncertain future as it slowly stumbles towards a cliff edge. Almost no chance for an interest rate hike tomorrow, while investors continue to stay away from U.K Equities and Sterling due to continued uncertainty with the Conservative governments continued failed Brexit proposals.
We have seen over recent days a further ramping up of Brexit headlines ahead of the summit, with both sides engaged in jockeying, but, remarkably the Pound has hardly moved on the headlines.
Markets are simply looking for concrete outcomes that give a clear view on what the future will look like. Perhaps this week we will get such outcomes.