Daily Brexit update: Sterling upgrades 'Soft Brexit' to Strong Buy
Ken Odeluga January 23, 2019 4:15 PM
The pound arcing to a new 10-week high on Wednesday, can only mean one thing: the market has upgraded soft Brexit forecasts to a ‘strong-buy’ from ‘buy’.
The pound arcing to a new 10-week high on Wednesday, can only mean one thing: the market has upgraded soft Brexit forecasts to a ‘strong-buy’ from ‘buy’. After all, with sterling traders now having completely erased the pound’s fall between the end of last week and the beginning of this one, the market’s already buoyant market confidence looks to have increased further. Furthermore, with the pound against the dollar topping the psychologically charged $1.30 level, whilst looking set for its biggest daily jump in six weeks, doubts have received another kick in the behind. Ironically then, the substance behind the uplift in sentiment is modest. The key is really that a top-level Labour Party official gave his endorsement to an amendment to Theresa May’s Brexit bill that will be debated again on 29th January. If enacted, the change will force a vote by Parliament on whether to lodge a request that the EU postpone the end of the Article 50 process that decides when Britain officially leaves the EU, currently 29th March. The UK would then seek a new end date nine months later. With not much more happening beyond the amendment though, uncertainty remains high. The pound’s new found vigour could even tempt a new round of profit taking soon.
How this affects our Brexit Top Markets:
GBP/USD: With a new two-month high of $1.3080 in the bag, a crystal clear daily top of $1.3177 from 7th November is now in view.
GBP/JPY: An emerging pro-risk phase after a slow week, helps the pound here. The test is whether the rate can hold above its known pivot at ¥142.75. It was at ¥143.23 a while ago.
EUR/USD: A dovish ECB on tap and slowing global and European growth remain key for the euro. But a break back into its recent $1.1374-$1.1430 range indicates that Brexit sentiment is outweighing downside worries for a spell.
EUR/GBP: Against the euro, the pound has enjoyed its best session since late last week. One striking thing about its price chart though was a blatant divergence between price and trend oscillators. For all its bullish trimmings, the beginnings of a consolidation could be in view, after sterling advanced 4.8% against the euro in just two weeks.
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