Summary:
- GBPUSD moves lower to erase last week's gains
- Brexit impasse continues to weigh on the pound
- Reports PM May set to attempt another vote on her deal
There’s been further weakness seen in the pound this morning with the currency falling back below the $1.30 handle against the US dollar to trade at its lowest level of the week. After ending last week with a flourish and hitting its highest level in a month, the current week hasn’t been so kind to sterling with Brexit concerns coming back into focus as cross-party talks appear to have stalled. The FTSE is also lower as global stock markets continue to pullback as US-Chinese trade tensions weigh on risk sentiment.
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The cross-party talks between the Tories and Labour appear seem to have reached the disappointingly predictable outcome of making no tangible progress with reports suggesting they are set to end imminently. Any hopes that this route would provide significant progress was clearly based on wishful thinking given the conflicting objectives and nature of cross-party politics and it now appears that we are pretty much back in the same position we were 2 months ago with the PM set to once more try and force her deal through parliament.
Given the highly challenging parliamentary arithmetic needed and lack of tangible progress since the deal’s last failure to receive support in the Commons the chances of this passing this time around appear remote at best. The decision to prepare for another vote seems to be an attempt to avoid another drubbing at the ballot box for both the main parties in the European elections in 2 weeks time, but it is unlikely to work and reeks of desperation.
As far as the markets are concerned, there’s not much that has changed of late and it remains improbable that any decisive outcome will occur anytime soon. This is capping the upside for the pound in the near term with the prolonged uncertainty acting as a persistent headwind for any sustained appreciation in the currency. Having said that, the downside is also fairly contained with a no-deal still looking highly unlikely and the two opposing effects are actually having a dampening effect on volatility with the GBP/USD rate trading near the middle of the narrow 5% range that has contained price for much of 2019.
GBPUSD has dropped back lower and is once more retesting the prior support around 1.2975. The market remains stuck in a relatively narrow range that has contained price for much of the year. Source: xStation
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