Sterling heads for worst week of 2019 on Brexit impasse

Marco Green
February 10, 2019

British five pound banknotes are seen in this picture illustration taken November 14, 2017.

The Pound (GBP) is trading in a narrow range against the US Dollar (USD) this morning after US President Donald Trump suggested it was "unlikely" he would meet with his Chinese counterpart Xi Jinping before 2 March.

The pound has been supported in 2019 by a growing belief that a last-minute agreement will avert a no-deal Brexit. But jitters have returned since a January 29 vote in parliament that asked May to persuade the European Union to accept changes to the Brexit agreement.

The technical oscillators like the Relative Strength Index (RSI) and Slow Stochastics (SS) are both pointing lower with Slow Stochastics making a bearish crossover in the Overbought territory indicating future price declines towards 1.2900 level representing a 100-DMA on a daily chart and 1.2800 representing 50-DMA on a daily chart next. Against the euro, it traded flat at 87.52 pence.

May will return to parliament on February 14 for a debate on the Brexit negotiations, when lawmakers could again try to wrest control of the process from her, but a vote on approving the Brexit deal is likely to come later in the month.

"Whilst May is no closer to securing any variation on her current Brexit proposal, at this price pound traders are still confident that the United Kingdom won't crash out of the European Union with no deal in place", said senior market analyst Fiona Cincotta at City Index.

But with no obvious way out of the Brexit deadlock in parliament and May yet to secure any concessions from Brussels, the pound faces further downside risks, analysts say.

"I can understand that speculative market participants are ready to bet on the GBP recovery".

Exchange Rate to Slump on Dovish BoE Outlook?

"I do not consider GBP weakness during this time to be sufficiently priced in".

Mired with Brexit uncertainty, the Bank of England is expected to hold the monetary policy unchanged voicing Brexit concerns as a major economic risk for the UK.

Looking ahead to next week's session, the Pound US Dollar (GBP/USD) exchange rate may strengthen on Monday, following the publication of the UK's latest GDP figures.

Other reports by Click Lancashire

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