Research Team at BBH notes that after hard exit signals from the UK government sent sterling down from $1.2430 on January 5-6 to below $1.20 at the start of the week, the pound rallied back to almost $1.2430 yesterday amid "sell the rumor buy the fact" activity.
Key Quotes
“It was helped by comments about the US dollar from US President-elect Trump and an advisor at Davos.”
“The seeming concession UK Prime Minister May made yesterday was that she recognizes Parliament's right to vote on the final agreement, even though her government is fighting against needing Parliament's approval to trigger Article 50 in the first place. What she has done is play the game of chicken with both the EU and her own Parliament. If the UK does not get what it wants, she threatened, it can leave the EU without an agreement. And if Parliament does not approve her agreement in the end, the two-year countdown would leave little time to negotiate a new agreement and therefore would force the UK to leave without an agreement. In the vernacular, May seemed to declare yesterday that it is "My way or the highway."
“Sterling is the weakest major currency today, though the US dollar is stronger against them all. It is off nearly 0.9% after rallying 3% yesterday. It had fallen 1.1% on Monday. While sterling has lost its upside momentum, a break of $1.2225-$1.2250 would likely be seen as a preliminary technical indication that a top is in place.”
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