Pound Still Sensitive to Brexit Talks
By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets
The hardest times are ahead of the British Pound. On December 11th, there will be a vote in the British Houses of Parliament on the Brexit agreement with the European Union and the results will directly influence the entire exit strategy – i.e., “hard” or “soft”.
The “soft” scenario, which is supported by the British Prime Minister Theresa May, has been criticized from all angles, but May’s Cabinet Ministers consider it as the only right and reliable way to exit the European Union. And rightly so, because this case is historically unprecedented. However, apart from other things, the opposition believes that the United Kingdom is already way too supine before the European Union. The “soft” scenario implies that the parties should sign the trade agreement for a transition period by the end of March 2019, when the UK is scheduled to exit the EU. The “hard” one, in turn, offers no trade agreements prior to that, which means that the United Kingdom will have to adjust to external conditions “on-the-go”.
Earlier, the Bank of England and the British government announced that the “hard” scenario might cause considerable economic stress for the country’s economy. The key trade parameters were earlier obtained approval from the EU, so the ball is in British policymakers’ court now.
To tell the truth, the Brexit agreement has a lot of subtle aspects, and trade agreements are not the worst part the policymakers have to deal with. The Irish border, the transition period extension, and many other nuances are some of the biggest issues. All of these offer little room for the Pound to be optimistic.
As we can see in the H4 chart, GBPUSD is testing the support level at 1.2725. The current range convergence is nothing but a new correction to the upside. The most probable (if not to say obvious) scenario implies that the pair may break the support and continue falling towards 1.2435. However, one shouldn’t exclude a possibility of a long sideways movement. In this case, a new short-term rising movement will move to reach the resistance at 1.2850.
Any predictions contained herein are based on the authors’ particular opinion. This analysis shall not be treated as trading advice. RoboMarkets shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.