Sterling advances as PM Johnson asks Parliament to vote on new Brexit proposals
The British pound soared towards the 1.2400 level against the U.S dollar after British Prime Minister Boris Johnson asked UK Members of Parliament to vote on his new Brexit proposals. PM Johnson hoped that getting backing from UK lawmakers would encourage EU officials to strongly consider his new Brexit-deal before the next EU Summit, on October 17th.
Jeremy Corbyn, the leader of the opposition Labour party rejected the proposals and vowed to vote against them if a vote is held in UK Parliament. Sterling was further boosted as Northern Ireland’s DUP party noted that PM Johnson’s new border deal was a ‘huge improvement’ as it removed the backstop agreement.
Earlier this week the UK Conservative party held its national conference, where newly elected PM Boris Johnson promised sweeping tax cuts and increased public spending to boost the United Kingdom economy after Brexit. PM Johnson also pledged to deliver a Brexit ‘compromise’, which would mean leaving the European Union, but both the UK and EU could still continue to trade with each other.
British PM Boris Johnson’s plans to reinvigorate the United Kingdom economy after Brexit comes at a time when important UK economic indicators are turning lower. Yesterday, the United Kingdom services PMI contracted, with a dismal 49.5 reading, marking the lowest services PMI reading since March this year.
Data inside the PMI showed that UK business confidence dipped to its second-lowest level since March 2009. The only time that UK business confidence had dropped lower was when the UK voted to leave the European Union in 2016. Earlier this week the UK construction PMI also dipped to second-lowest reading since 2009, with a 43.3 headline number.
GBP/USD Daily Candlestick Chart | Source: ActivTrader
The British pound has had a volatile trading week against the greenback, with the pair recovering sharply from the 1.2200 level. The lower time frames continue to highlight a valid head and shoulder pattern which predict a potential drop towards the 1.1800 level. Only a move above the 1.2580 level can negate the bearish pattern.
Written by Nathan Batchelor, External Analyst, ActivTrades
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