Date: 12 Mar 2019
The British pound is becoming increasingly unsettled on the foreign exchange markets, as traders brace themselves for three potential key Brexit votes UK Parliament this week. The pound slumped to its lowest trading level since February 19th on Monday before quickly recovering back towards the 1.3300 level as speculation mounted that British PM Theresa May had produced an ‘agreement’ with European Commission President Jean-Claude Junker in Strasbourg.
Without major concessions from Junker, British PM Theresa May’s Brexit plan still faces the prospect of being heavily voted down in UK Parliament later today. Theresa May’s previous withdrawal agreement negotiated with Brussels last year was overwhelmingly rejected in January and was the largest defeat for any sitting government in UK history.
Unless the new ‘agreement’ with the EU is a game changer for Brexiteers, Prime Minister Theresa May’s deal is expected to once again lose by a significant margin as no clear breakthrough over changing the Irish border issue has emerged, this then leaves a second vote on Wednesday, which is being held on whether UK lawmakers want to leave the European Union without a deal.
Current polling suggests the majority of UK Parliament is expected to refuse a Brexit no-deal scenario, which then leaves the likely prospect of a third vote on Thursday, whereby UK lawmakers will vote on whether the United Kingdom should ask the European Union for a limited extension of the March 29 Brexit date.
Market participants are still bracing for large swings in sterling and British pound related currency pairs; recent reports over the weekend noted that the Bank of England had asked UK banks to triple their liquid assets in the three months around Brexit as a precautionary measure in case interbank lending dramatically slows down.
GBP/USD Daily Mountain Chart | Source: ActivTrader
The GBP/USD pair is only likely to remain pressured while trading below the 1.3100 level, the neckline of a bearish head and shoulders pattern is currently located at the 1.2975 level, with the pattern suggesting a drop of close to four-hour basis points. If the GBP/USD recovers above the 1.3300 level, the 1.3350 level is the range-top, with the 1.3599 level offering the strongest longer-term resistance above.
Written by Nathan Batchelor, External Analyst
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