Pound Sterling’s Foggy Future
Weaker recoveries were seen in both the UK manufacturing and service sectors, with the latter recording the greatest loss of momentum since July.
A roller coaster for the British pound
2019-11-11 • Updated
Not a single day can come and go without some Brexit news. Optimism chases pessimism and vice versa. Get an update on the situation as well as trading ideas for the GBP.
Brexit
British and the EU negotiators secured a Brexit deal on paper (the thing is about 600 pages long!). Now Prime Minister Theresa May needs to obtain her Cabinet’s support of the plan. The deal also needs to be approved by the British parliament before the UK leaves the bloc on March 29, 2019. The European leaders, in turn, plan to sign the deal on November 25.
In her efforts to make the Brexit deal a reality, Theresa May is trying to find a compromise between those in Britain who want to leave the EU and those who would like to remain as closely tied to the neighbors as possible.
She sounded really optimistic after a Cabinet meeting on Wednesday. Today, however, British Brexit minister Dominic Raab said that May’s plan threatened the integrity of the United Kingdom and resigned. Other resignations may follow. It turns out that by trying to please everyone, May can please no one.
Of course, Theresa May had worse moments in her career and she will likely do everything she can to remain in control. Yet, the time is running out, and it’s clear that the situation is very shaky. If May keeps failing to gather support for her actions, her reputation suffers and she will have to resign.
Impact on the GBP
The British pound desperately wants the uncertainty out of the way. If traders believe that Britain and the EU have paved a way for the future cooperation and it will work, they will buy back the GBP.
GBP/USD is currently trading around 1.30. The progress in Brexit may drive it up towards 1.40. If, however, the UK politicians will blow it up, the currency pair may head down to 1.20.
The matter may remain undecided for more weeks to come. If Theresa May faces a confidence vote and wins, the GBP will dip and then recover. If she loses, everything will depend on the new British leader.
The short-term outlook for the British currency is negative. Volatility will remain high. There are just too many things to worry and good news quickly turn to bad news. Traders will likely remain reluctant to buy the GBP. The current consolidation range is between 1.3180 and 1.27. The pressure will be on the lower levels.
Follow the news to trade the GBP with profit!
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