Sterling hits five-month high over Brexit extension speculation
The British pound traded to its highest level against the greenback since September 20th, 2018, as speculation mounted that the United Kingdom could extend Article 50 and delay its March 29th departure date from the European Union. Sterling also received a boost as opposition leader Jerome Corbyn announced that he was ready to support a second referendum on Brexit.
Speaking in the House of Commons yesterday, British PM Theresa May sought to clarify speculation that the United Kingdom could extend the Article 50 deadline. PM May said she will be holding a second Meaningful Vote on her proposed Brexit deal on March 12th, in the eventuality that her deal is once again rejected, she would then hold a vote in UK Parliament on March 14th, whereby lawmakers could vote on a limited extension of Article 50.
The British Prime Minister reiterated her commitment to leaving the European Union with a deal in place before the March 29th deadline, noting that she had a positive meeting with EU leaders in Egypt, and it was not her intention to extend Article 50. PM May also told UK Parliament that she is working hard on alternative backstop arrangements to the Irish border in order for her deal to be more acceptable to Conservative party rebels, who voted down her previous Brexit deal.
The British pound may have reached a turning point in the short-term, with PM May’s clarification that the UK will either face the prospect of a Brexit deal next month or a limited extension of Article 50, which would ultimately be extended by months and not years. Market fears that the UK is going to crash out of the European Union without a deal in place in just over four-weeks time have now been put to one side in the short-term.
Bank of England Governor Mark Carney talked up the United Kingdom economy during yesterday’s inflation report hearing before the UK Treasury Committee, with Governor Carney stating that the fundamentals of the United Kingdom economy remain solid despite Brexit and it is just Brexit uncertainty creating tension between businesses and consumers.
GBP/USD Daily Mount Chart | Source: ActivTrader
In terms of the technicals surrounding the GBP/USD pair, a clear break above the 1.3300 resistance level sets sterling up to trade in a much higher range over the medium-term. If bulls can clear the 1.3300 resistance level we should expect to see the GBPUSD trading between the 1.3300 to 1.3500 levels.
Furthermore, a bullish Golden Cross is currently underway on the daily time frame, which also supports higher trading ranges for the GBP/USD pair. If we see bulls struggling to breakout above the 1.3300 resistance area, we should expect sterling to range between the 1.3300 and 1.3095 levels.
Written by Nathan Batchelor, External Analyst
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