Sterling blasé on data – Full attention on Brexit

GBPJPY, H1 & H4

Brexit: EU and UK negotiations are in the “endgame” according to British Prime Minister May late night in London. But, it’s clear that the Irish border backstop issue still remains unresolved, and time is ticking.here are reports that the UK and EU are close to announcing a draft deal on divorcing terms, but it is unclear if it will have even cabinet-level support let alone parliamentary support in Britain given the “worst of both worlds” plan. UK government sources cited by the BBC said that a deal needs to be done by tomorrow if there is to be a late-November EU summit. The BBC also yesterday cited 3 unnamed cabinet members saying that they are against the current Brexit plan, which followed Friday’s resignation of cabinet member Joe Johnson, on the view that it will not pass in parliament.

Sterling has lifted on news that a deal is apparently near, but the omens aren’t looking good for the plan to find parliamentary approval, which raises the risk of a no-deal Brexit or, more likely, another referendum.

GBPJPY rebounded from 2-day low, at 145.98 which is also the 20-day SMA during Asia session. The rally in Chinese equity markets, dragged the Yen lower. Today’s recovery for GBPJPY reached nearly 38.2% of November’s declines, while hopes for retest of November’s peal could be supported on a move above 147.70 barrier (gap November 9-12 and the 50.0 Fib. level).  The Brexit uncertainty along with uncertain trade outlook, and continued risk off conditions going forward, may weigh on Pound and support the Yen respectively. Hence today’s gains could be consider as a possible correction on the overall decline of the pair. On the failure of the pair to post new high, bearish momentum is seen increasing, with intraday Resistance at 145.50-145.55 area and Support at 146.35.

Oppositely, to the upside, the break of intraday Resistance should boost the GBPJPY to 147.70.

Nevertheless , UK labour market data released earlier, with UK unemployment unexpectedly ticked higher, to 4.1%, though average incomes rose 3.0% y/y. Employment rose 20k, as expected, and the employment rate was 75.5%. Average household nominal earnings (including bonuses), which is a metric that the BoE has been closely monitoring, rose 3.0% y/y in the three months to September, matching the median forecast and lifting from 2.7%. Average earnings in real terms increased 0.8% (including bonuses).

The data has cast little impact on sterling, with attention fully centred on Brexit.