GBP/USD: Lack of EU-Brexit deal could threaten Sterling bull run
|- GBP/USD bullish attitude still in play.
- Recent shortselling has left pair exposed.
- Brexit risks continue to cast long shadows.
GBP/USD is trading in the 1.4040-50 area in Tokyo trading, lifting in Asia markets from the week's open at 1.4013.
The Sterling appears to be lifted against the US Dollar again, following a slide that lasted a couple of weeks as markets temporarily turned Dollar-bullish in the face of inflationary risks; that move looks all but over as the GBP/USD is erasing the scant Dollar gains, once again marching towards 18-month highs above 1.4344.
The bull run may soon come under threat from Brexit once again, however: The UK Telepgraph reported comments from European (EU) Parliament’s Chief Brexit coordinator Guy Verhofstadt, who stated that the UK will be heading into Brexit day without a finalized trade agreement in place with the EU, and that there will be an 'annex' providing the backbone structure of a future deal, while key factors such as freedom of movement for European citizens will remain in place following Brexit. The lack of a finalized trade agreement saps sovereign control from the UK post-separation, hampering the entire purpose of the EU-UK split in the first place.
The GBP faces an inflation trends hearing on Tuesday at 09:30 am, followed by wages and earnings married with unemployment and public sector borrowing, all at 09:30 on Wednesday. With the UK economy on the growing side, and the Bank of England (BoE) gearing up to lift interest rates, with some analysts calling for a May hike, positive news could give the Sterling reason to keep bumping up the charts despite Brexit worries continuing to loom overhead.
GBP/USD Technicals
As noted by FXStreet's own Valeria Bednarik, "Technical readings in the daily chart lean the scale toward the downside, as the pair faltered around the 61.8% retracement of its latest daily decline, now battling with the 50% retracement and a flat 20 DMA. Indicators in the mentioned chart have lost their upward strength, the Momentum below its 100 level, and the RSI currently around 55. Shorter term, and according to the 4 hours chart, the downside potential seems limited as long as the price holds above Friday's low of 1.3996, as the pair bounced from a bullish 20 SMA, while technical indicators remain within positive territory, with the RSI aiming to regain the upside around 55."
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