The Pound – Volatile but Pressured
|GBPUSD, H1
The Pound continues to underperform the Dollar, which has driven a modest loss in Cable, to the lower 1.2700s. Markets are bracing for tomorrow’s Brexit vote in the UK Parliament, which the prime minister has affirmed will be taking place despite reports of it being delayed, and which is widely expected to see the government’s Brexit deal voted down. Labour, the Liberal Party, Northern Ireland’s DUP, Scotland’s SNP, and significant numbers of Conservative Party members (mostly from the Eurosceptic cabal, but also some Remainers) are all set to vote against it. If the deal is rejected, it would immediately create scope for multitude scenarios in the coming weeks depending on how big the defeat is.
The European Court of Justice (the much hated by Leavers ECJ) ruled today that the UK could indeed call off the Article 50 notice to exit from the EU any time before March 29, the current official exit date. The decision was expected after a court adviser already issued a similar opinion last week. Both sides had sought clarification on the issue, brought forward by pro-remainers in the U.K. and also contested by the EU, where officials feared that the right to unilaterally stop the withdrawal process could lead to an abuse of the process.
The raft of UK data today was also on the weak side with GDP confirmed at a glacial 0.1%, the Goods Trade Balance missed expectations by over 1.4 billion GBP and Manufacturing Production was worse than expected.
The spike in Cable to 1.2760, following the ECJ announcement, was short lived, with the pair trading below the 5-, 9- and 20-period moving averages on the H1 chart. Support sits at S1 under 1.2700 at 1.2697, with the daily pivot at 1.2744. The weak rally in the Asian session was capped by the 200-period moving average at 1.2760.
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