GBP/USD Forecast: Sterling in November highs ahead of May Day parliamentary speech

  • The GBP/USD is trading little changed on the upside, but the highest in 8-weeks in middle of 1.2800s.
  • The UK Prime Minister Theresa May is set to speak in the parliament later on Monday in an attempt to save her Brexit deal scheduled for a parliamentary vote tomorrow.
  • The UK parliament is unlikely to approve May’s Brexit deal as EU’s assurances fall short of convincing lawmakers.
  • With Sterling waiting for key Brexit deal vote scheduled for Tuesday, the currency pair is set to move sideways.

With 74 days left before officially exiting the European Union, the United Kingdom is still far from having a clear view of what kind of Brexit it is set to experience. Looking at the Sterling levels at the highest since November last year, it looks like currency traders are not bothered at all.

The GBP/USD is trading little changed on the upside nearing 1.2860 ahead of the pre Brtexit vote speech by the UK Prime Minister Theresa May in the House of Commons. Although Theresa May’s call on lawmakers is expectedly a bare warning that delivering Brexit means voting for her deal as there are no other options on the table, the lawmakers are set to flex their muscle and reject the deal after the parliament banned the UK government from leaving the EU with no deal last week.

Voting for a May’s Brexit deal means orderly Brexit. Ousting the Brexit deal means either re-work the deal with the EU partners, that is highly unlikely, or face other domestic consequences including calling the early elections that will probably require delayed Brexit or even no Brexit at all.

Even political partners of Theresa May in the EU now face a tough time and admit that the option of delayed Brexit might be a compromise outcome. 

Technically the GBP/USD broke a long-term downtrend on the upside and it looks set for further gains fuelled by hopes for delayed Brexit. With the rejection of Brexit deal in the UK parliament widely expected and priced-in, the potential is building on the upside, although fundamentally rejecting Brexit deal is GBP/USD negative. The Relative Strength Index is flat in the neutral territory, but the Momentum and Slow Stochastics are elevated with Slow Stochastics set to make a bearish crossover in the Overbought territory. With Sterling waiting for key Brexit deal vote scheduled for Tuesday, the currency pair is set to move sideways. On the downside, the GBP/USD needs to break 1.2770 and below to return to the old trend low. On the upside, the 1.3000 is the next hurdle for GBP/USD.

GBP/USD daily chart


 

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