The euro cross has been in a bumpy ride since March 11 on the latest developments of Brexit. On soft-Brexit theme, the pound was appreciated nearly 5.0% from January 2019 high.
We still believe the volatility likely to remain elevated for some weeks ahead and hard to gauge how much the GBP might benefit under a clear soft-Brexit outcome.
As we knew three votes, have taken place in Parliament, but two out of three drawn ended on a positive note.
“First, Prime Minister May’s deal was voted down for a second time. Then a ‘no deal’ Brexit was precluded by the second vote. And finally via the third vote, scope for an extension of the Article 50 negotiation period was approved” Westpac said in a note on Monday.
Deutsche Bank said “A dramatic Brexit week ended as expected, as the House of Commons rejected May’s deal, rejected leaving the EU without a deal but supported asking the EU27 for an extension. The decision has to be taken unanimously by the EU27 leaders”.
Now UK Prime Minister May is not allowed to hold the 3rd vote until she produced back with significant changes to the previous one, John Bercow said on Monday, while PM May has been seeing to holding another important vote this week. If PM May’s deal is successful, Parliament have agreed on an extension to June 30th.
Business Insider reported, “UK Prime Minister Theresa May cannot hold a third vote on her Brexit deal until there are significant changes to it, House of Commons Speaker John Bercow said on Monday.”.
UK GDP growth was 0.5% in January 2019, as the economy rebounded from the negative growth seen in December 2018, the Office for National Statistics reported. The recent growth was led by Services, production, manufacturing, and construction.
On a data front, we will see March labor market statistics, CPI, Retail sales and BOE Monetary Policy Meeting.
We do not expect the Bank of England to change policy at its meeting this week (Thu).
Deutsche Bank said, “The Bank of England seems in no hurry to raise rates in the current environment with weaker UK data, slower growth in rest of Europe and high Brexit uncertainty.”
Westpac said, “no chance of a change in the Bank Rate this month, and the BOE will emphasize the conditionality of its forecasts. “
The euro cross has reaffirmed support at 78.6 fe and also spotted with a double bottom at 0.8470 levels. The daily oscillator has just turned back bearish crossover, but the RSI has been propelling higher.
On the upside, the price needs to take out the 0.8620 levels to rally further to 0.8675, but the medium trend points the euro cross lower. The market must erase the 0.8470 to set the stage for a further retracement to 0.8400 and 0.8350.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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