The cross is trading at 3-years high after the speech by Theresa May over the weekend. The timing of Article 50 is to be “no later than the end of March next year.”
Telegraph reported, Mrs May said that after Brexit the UK will be “a fully-independent, sovereign country” that will no longer be in the “jurisdiction of the European Court of Justice”, suggesting that Britain is preparing to leave the single market.
GBP FX positioning: Leveraged funds’ net short positioning in GBP rose in the week (to 45% from 22% last week). The highest level of net short GBP positioning in the last year is 61%, which was last seen August. Asset managers’ net short positioning in GBP remained flat at 71%.
CFTC: EUR net shorts edged lower last week. Net positioning has lacked direction in recent weeks with speculators influenced both by economic data and last month’s indication from ECB President Draghi that the Governing Council had not discussed an extension of QE at the September policy meeting.
Rabo bank reported, Bearish bets against the pound surged again last week having dropped back the previous week. Concerns regarding a hard Brexit have since risen further suggesting that GBP is set to remain vulnerable.
The FX street is negative on the BREXIT impact, but the economic data saying the otherway.
UK GDP in volume terms was estimated to have increased by 0.7% in Quarter 2 2016, revised up 0.1 percentage points from the second estimate of GDP published on 26 August 2016. This is the 14th consecutive quarter of positive growth since Quarter 1 (Jan to Mar) 2013.
Conditions in the UK manufacturing sector continued to improve at the end of the third quarter. At 55.4 in September, up from 53.4 in August, the seasonally adjusted Markit/CIPS Purchasing Managers’ Index rose to its highest level since June 2014. PMI level since its EU-referendum related low in July has been sufficient to make the third quarter average (52.3) the best during the year-to-date.
The UK economy has been doing a lot better despite the BREXIT risk in the future.
What’s on this week?
Tuesday- Sep Construction PMI forecast 49.0 vs 49.2
Wednesday- Sep Services PMI forecast 52.0 vs 52.9
Friday-Halifax House price Index y/y basis 5.8% vs 6.9%
August Industrial Production 0.1% vs 0.1%
August Manufacturing Production 0.5% vs -0.9%
August Trade balance -11.30B vs -11.76B
Also read: EUR economic events
Technical view: the cross is trading at 0.8730 on Tokyo session, remains below yesterday’s high. The cross has parallel resistance seems between 0.8770 and 0.8820 levels.
If the price fails to settles above these, probably double top might expected on the daily chart. A potential extension would expect 0.9000-0.9050 if the price settles above 0.8820 2013 February high.
Alternatively, failed to settles above 0.8820 2013 February high, the price likely to visit the support levels finds at 0.8600/0.8580 and 0.8550 50Dsma. The daily RSI seems at 69.00.
Key risk event- Article 50 legal challenge to be heard 13 and 17 October