No deal risk slipping further away - how far can GBP go?
It was clear from events last night in the UK parliament that there is no appetite for a no deal Brexit and although that motion was won by a slim majority, the numbers will not allow for a disruptive exit. We saw a sharp move higher in NY last night after 2 sets of votes rejecting no deal were passed, and Cable pushed through the cycle highs to post highs around 1.3375-80. This is now the target for buyers today, though technically, we note some resistance a little over the 1.3400 mark.
EUR/GBP also pushed down to the lows and although it failed to hold below the 0.8500 mark, the bounce has been shallow and there is a strong interest to join the sell-off here with the 0.8645-65 zone holding firm. We cannot rule out a fresh move higher at this stage, and indeed lower in Cable, as this is just the withdrawal deal and there will be many years of negotiation which will no doubt cause plenty of volatility.
For now, though, it is all about the UK getting to a point where they can agree on a withdrawal deal, trigger the transition period and get on with trying to set out the future relationship with the EU.
If this can be agreed, the initial target for Cable could reach as high as 1.3600. and perhaps a little higher, but any more than this would assume the trade relationship will go well and that is a big assumption to make at this point.
For EUR/GBP, the charts say it all, and with key range lows at 0.8300-10, this would be the initial target and would suggest a very strong base over a period of uncertainty which will remain until all deals are negotiated - many years down the line. If we do break below 0.8300, then 0.8000 would be the next major area, though this will take some time to achieve.
The battle lines are drawn!