Why Is GBP under attack?
No surprises for guessing why the Pound is under pressure at the moment, as risks that the UK is heading for a no deal have risen once again. With the UK PM asking for time and being accused of running down the clock, it was somewhat expected that nerves would start to fray once again and traders are fading more of the optimism which saw Cable recover to a little over 1.3200 earlier this year.
Since falling back under 1.3000, GBP has been well contained ahead of the psychological level, with yesterday's surge off the back of a large buy order in the futures market faded above the 1.2950 mark. We are now back testing the 1.2800-30 zone, and a move below here will suggest that we could test the lows below 1.2700. As we saw in the aftermath of the initial rejection of the withdrawal deal last month, Cable slumped to lows of 1.2670 or so, and this is now the major support level - or target - which would be in focus if 1.2800 was to give way.
In conjunction with this move, we would see some upward pressure on EUR/GBP, though last month, we also saw sellers fading the rally into the 0.8820-40, yet dips have been bought below the 0.8750 mark and so the stalemate continues. With the EUR facing its own issues, some would say that EUR/GBP is not the best place to reflect GBP weakness, so on this basis, upside moves are likely to be limited unless we get some overtly negative news on Brexit - ie, no deal!