British pound losing momentum as May plan B worries

Swissquote Bank Research Team Swissquote Bank Ltd

After facing a tough defeat in front of the UK parliament and surviving a vote of no confidence, PM May continues struggling to make her points among the assembly. The recent statement made by Labour party leader Jeremy Corbyn that a second Brexit referendum would be a good resolution confirms that PM May continues to face disagreements.

Indeed, the position maintained by PM May, which favors the maintenance of current 29. March 2019 deadline while not considering the idea of a second referendum and of a comeback into closer association with the EU, is pausing problems for investors, as the future direction of the divorce and the British pound remains largely unknown. For now, it seems that investors are supporting a bullish bias over the pound, which clearly made decent gains against major currencies (Week-to-date EUR/GBP: -1.36% and GBP/USD: +0.70%). However, under current circumstances, and considering the short amount of time given to PM Theresa May to provide the House of Commons with a decent plan B (deadline on Monday), it appears that the postponement of current Brexit due date through the extension of Article 50 remains the single, realistic solution for now to dismiss the risk of a hard Brexit. Would it be a GBP positive? Difficult to say. But to be brief, it seems that current GBP move remains highly risky, since the future European Parliament elections from May 2019 could play a key role in current situation.

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GBP/USD is currently valued at 1.2944, approaching 1.2850 short-term.

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Swissquote Bank Research Team

Swissquote Bank Ltd

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