Investors are becoming exasperated by the lack of new direction in Brexit talks. Prime minister May is reported to be tabling the Withdrawal Agreement (bill) for the fourth time sometime next month. Hopes of a successful vote are low.
As such, investors are dealing down their expectations of a ‘Sterling bounce’. Against the US Dollar, the FX rate has broken beneath the 1.300 key level again. This is the second breakdown in a month, suggesting GBPUSD’s path of least resistance is south.
Against the Euro, Sterling also failed to extend its rally above 1.180 (see below). Its upside failure led immediately to a break of support at 1.150 – and also a bearish crossover below its long-term trend indicator.
Even more dismal is Sterling’s performance against haven currencies. GBPJPY, for instance, saw the rate plunge to a multi-month low this week. More downside is expected if the 140.0 key level gives way (see below).
Overall, GBP is suffering from persistent selling despite some positive economic data (e.g., record low unemployment). Brexit is casting a long shadow on the currency and will remain a drag for the foreseeable future.
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Jackson has over 10 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.