Softer Brexit hopes boost GBP/USD, and there may be more in store
- GBP/USD is trading on high ground on two efforts to prevent a hard Brexit.
- Brexit headlines dominate but will make some way to critical US data.
- The technical picture has markedly improved for GBP/USD.
is trading close to 1.3200, significantly higher. It’s nine days to the delayed Brexit Day, April 12th, and the pound rallied on the potential for another extension.
Late on Tuesday, UK PM Theresa May addressed the nation and said that she is trying to break the Brexit logjam by holding talks with the opposition Labour Party. She is striving to reach a Brexit approach that both parties can agree to and commit to, and then ask them for an extension.
The move implies a softer Brexit, perhaps one with a permanent customs union and participation in the single market, and markets prefer a milder version of an EU exit than a harder one.
Her move is partly in response to another effort to prevent a hard Brexit, or more precisely, a no-deal Brexit by another cross-party effort. Conservative MP Sir Oliver Letwin and Labour MP Yvette Cooper aim to pass a binding bill in Parliament that will force the government to prevent no deal.
The idea is to pass it by three readings today and have the House of Lords debate it on Friday. The timetables are prone to changes.
Both cross-party efforts come in the last minute and are somewhat desperate, but have cheered markets. In the meantime, the Europeans have toughened their positions and reiterate that another extension is not automatic. Nevertheless, as they too will suffer from a cliff-edge Brexit, especially France that has taken the hardest stance, markets are convinced that they will grant another delay.
Not only Brexit
Markets are also content with reports that US-Sino talks have made progress and the news weighs on the safe-haven US Dollar.
The UK Services PMI dropped to 48.9 points, reflecting a contraction in the nation’s largest sector. . Brexit is already biting, and it limited the pound’s gains at least until the next Brexit headline.
US data may have a more significant impact. The ADP report is set to show a slightly lower gain in private sector jobs and will serve as a hint towards the official . Later, the ISM Non-Manufacturing PMI will likely prove a robust services sector in the world’s largest economy.
GBP/USD Technical Analysis
GBP/USD has turned bullish. Momentum turned positive; the Relative Strength Index is on the rise and cable crossed both the 50 and 200 Simple Moving Averages.
Initial resistance is at 1.3200, which capped the pair earlier and is a round number. 1.3270 was the high point last week, and 1.3330 was a swing high beforehand. 1.3388 was the cycle high.
1.3150 held GBP/USD down on Tuesday and served as the initial support line. 1.3115 was the low point on Tuesday, and it is followed by Friday’s low of 1.2980.