Where now for GBP ahead of Brexit votes?

A reduced possibility of no deal has lifted the pound back to $1.33, although hurdles remain in the longer term.

The recent surge in GBP/USD has taken the pair back to the September 2018 highs above $1.33. The basis of this move has been renewed market optimism that a ‘no-deal’ scenario is much less likely.

The shift from the UK Prime Minister (PM) Theresa May has seen members of parliament (MPs) given a date for a vote on rejecting a no-deal outcome, as part of a series of votes on her deal and on an extension to Article 50. Of all the possible scenarios, a no deal bothers investors the most, since it would technically suggest that the UK would be cut off from key export markets and find its financial services isolated from Europe, as well as a host of other unpleasant outcomes.

It is still unclear how a no-deal will be avoided, since if MPs reject PM’s withdrawal agreement and vote against an extension of Article 50, no deal would be the only outcome possible, barring some very fancy footwork from the EU and the UK. However, the will appears to be there and, with the clock ticking down to 29 March, minds will hopefully be concentrated on providing a smoother outlook for the UK economy.

GBP/USD has been rallying on the news, further reinforcing the idea that the pair has been bottoming out over the past six months. Repeated moves into the $1.25-$1.27 zone found buyers, and the January rally managed to create, if only just, a higher high, followed up by a higher low in mid-February.

Combined with this, the moving averages have begun to flatten before turning higher, reinforcing the bullish view. While some weakness is now possible, any pullback that stays above $1.28 creates another higher low and a further buying opportunity.

Cable still has a long way to go before it can reclaim the highs of late 2018, and there will be plenty of disruption along the way. But a softer policy outlook from the Federal Reserve has weakened the US dollar, boosting GBP/USD as a result. With the future of the UK economy looking less uncertain, sterling may have a better time ahead of it. Brexit and its associated problems have not gone away, and long trade negotiations lie ahead, but some of the dark clouds over the UK have now dissipated.


IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Please see important Research Disclaimer.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.