Soft Brexit for sale

Sterling’s ‘sell-the-news’ pullback remains tidy with no remarkable volatility.

Brexit fatigue

Still, as the pound hovers near $1.32 from as high as $1.3350 a day ago, the question of whether underlying sentiment is as positive as once appeared arises. Indeed, part of the rationale for lightening up is that a delayed Brexit wouldn't remove longer-term economic uncertainties. A chilling rise in job cuts was a key takeaway from factory data out earlier. Nor would an extension of the Article 50 period guarantee to resolve the backstop impasse. EU “Brexit fatigue” (to quote EU Commission President Jean-Claude Juncker) could even limit any delay Brussels is willing to grant. Either way, there have been no significant developments since Parliament voted to hold Theresa May to her word this week. And with no top-level discussions planned between now and mid-March votes and a 21^st-22^nd March EU Summit, talk will help fill the vacuum. See Friday’s Times report that Ireland’s DUP signals a new openness to compromise; not for the first time. Unsourced reports are likely to be front and centre for now.

Meanwhile, the near-term technical focus for sterling against the dollar is $1.3217, a support confirmed by multiple bounces on Friday, the inverse of its January role as resistance. Heavy intraday and daily oscillators (like RSI) put some welly behind the down move since Wednesday. At $1.3222 (last check) momentum sellers seem in control. Moving below key support would add conviction and a likely eye, initially, on hourly lows from earlier this week between $1.3264/80.