Over 1,000 days after the UK narrowly voted to leave the European Union, it’s still not remotely clear how the new relationship will look, who is in charge…and even whether the UK will leave at all!
Yesterday, Parliament voted to “seize control” of the Brexit process from PM Theresa May. As its first point of order, Parliament will hold non-binding “indicative” votes on the path forward tomorrow, with the options running the gamut from a no-deal Brexit in the next few weeks to another referendum to cancelling Brexit altogether. Meanwhile, speculation abounds that PM May could soon offer to resign (or be forced out) in the coming days. With apologies to my UK colleagues, the whole situation is “a right pig’s ear.”
Amidst the contentious disagreements, all parties seemingly agree on the need to avoid a no-deal Brexit, and as a result, GBP/USD continues to hold up relatively well around the 1.3200 handle as we go to press. From a technical perspective, the pair has established support in the 1.3050-1.3100 area from its rising 50-day moving average and a bullish trend line off the start-of-the-year lows. Strong resistance looms in the 1.3300-1.3360 range, which has capped rates for the past nine months.
The outcome of tomorrow’s votes may help determine whether GBP/USD tests resistance or support next, but as we saw with the Brexit vote itself, a deeply divided, non-binding vote often leads to even more uncertainty rather the clarity that traders are seeking. With GBP/USD coiled tight, an explosive move is likely in the next week or two.
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