Pound: Tasting Various BREXIT Flavours

Pound: Tasting Various BREXIT Flavours

Vinish Kumar
06 Feb 2019 06:34 PM

Around two weeks back, January 23 to be precise GBP went on a tear on the back of the news that Labour Party in UK could support a proposal to delay Brexit until at least the end of year. GBP/USD from a level of around 1.2850 on January 22 went up as much as 1.3218 on January 25 on the delayed Brexit hope. In the last one month, GBP/USD has traded in the range of 1.2670 to 1.3218. The volatility at its best, especially for traders provided the view has gone right!(Refer graph below depicting the 1.2900 to 1.3200 move)

As we see today, GBP has lost almost all the gains made in the last fortnight to trade at 1.2948 at the time of writing. It is getting some support around 1.2950 on a report that several UK cabinet ministers have secretly discussed plans to delay Brexit by eight weeks. It has renewed hopes of delayed Brexit from the March 29 deadline to May 24 despite warnings from the PM Theresa May that such discussion could be "counter-productive". Theresa May will be travelling to Brussels to meet the EU policymakers and formally announce a renegotiation of her Brexit deal tomorrow.

Bank of England will be having its monetary policy meeting tomorrow wherein it would also release the quarterly inflation report. QIR report provides the BOE's projection for inflation and economic growth over the next 2 years. BOE is expected to hold the official bank rate at 0.75 %.

GBP/USD need to surpass the 1.3000 in order to revisit the 200-day simple moving average around 1.3040, above which it can aim for the 1.3100 level. On the downside, a break of 1.2905 can take it to 1.2800. In the remaining part of this week, we can witness extreme volatility in GBP against the majors and would not be surprised to see a (+/-) 2 to 3 big figure movement based on the Brexit and BOE meet outcome.

Date : Feb-2019