Last week, the UK’s Prime Minister May lost in Parliament trying to pass her Brexit deal, then in a head-spinning act of cognitive dissonance Parliament passed a bill asserting they did not want a no-deal Brexit. Then, quite predictably, they passed another bill telling May to go to the EU and ask for an extension. While the politics of this are a bit intrinsicly interesting in the same way gawking at a car accident is interesting, Brexit more immediately impacts financial markets. More specifically, the pulse of Brexit can quite easily be seen in the price action of the pound against the dollar. So where is GBPUSD headed?
The short answer for the short-term is that meme of the dog in the house that’s on fire with the comment, “This is fine.” The longer answer is a bit more nuanced and uncertain. Technically, GBPUSD has some resistance and a long-term trend line to break through before Elliot wave point 5. Also, the headline political risk of this pair is incredible and also deserves some time to be discussed. Primarily, this includes the upcoming votes in Parliament including May’s last chance to avoid a no deal Brexit (which she is quite likely to lose if she tries again) and in all likelihood will then go to the European Commission. In the Commission, it gets a bit tricky since it will take only one EU member state to reject the UKs Article 50 extension request, but observers at the Financial Times suggest there is much motivation for the Commission to accept this move.