GBP/USD – Pound Closing in on 1.25 Ahead of Brexit Ruling

The British pound has posted strong gains in the Monday session. Currently, GBP/USD is trading at 1.2490. It’s a quiet start to the week on the release front, with no releases from the UK or US. On Tuesday, the UK Supreme Court will rule whether Prime Minister May must obtain parliamentary approval before triggering Britain’s exit from the European Union.

The pound enjoyed its first winning week since late November, as GBP/USD jumped an impressive 2.8 percent last week. The pound is closing in the 1.25 line and is trading at 4-week highs. Brexit is back in the spotlight, following Prime Minister’s May speech last week, which sent the pound sharply higher. May wants to start negotiations on Britain’s departure from the EU in March, and has said that the negotiations should take two years to complete. However, the government faces a serious hurdle on Tuesday, as the UK Supreme Court will render its decision on whether the government can trigger Article 50, which commences the departure from the EU, without government approval. If the Court rules against the government, May could be forced to delay the March timetable for invoking Article 50, as many MPs are against Brexit. The pound is gaining ground on Monday, as investors expect the government loses the case and the pound to move higher.

Donald Trump seems to be a magnet for controversy and the presidential inauguration was no exception. The inauguration on Friday proceeded without incident, but anti-Trump protesters responded with a massive protest on Saturday in Washington, much to the irritation of Trump. Although there is an unwritten rule that a new president is granted 100 days of grace, this may not prove to be the case this time around. The bruising election campaign is still fresh, Trump is in  combative mood and continues to snipe at the media, so chivalry and good will may be lacking. As we enter uncharted territory and begin the Trump era, how will the US dollar react? On Friday, Oanda’s Stephen Innes provided this assessment:

the downside risk for the USD remains elevated more so from Trump’s inauguration if he fails to underscore economic policy. On the other hand, if Donald comes out firing on all fiscal stimulus cylinders, bond yield will surge, and the greenback would catch an enormous updraft… the President–elect takes centre stage as we begin a new chapter in American politics and global financial markets. Buckle up; we are likely in for a wild ride in the coming 100 days [see the first link below for the full article]

We begin a new chapter for the US Dollar

Trumps Protection Bias Damages Dollar

GBP/USD Fundamentals

Monday (January 23)

  • There are no UK or US releases on the schedule

Upcoming Key Events

Tuesday (January 24)

  • 4:30 EU Membership Court Ruling

GBP/USD for Monday, January 23, 2017

GBP/USD January 23 at 10:55 EST

Open: 1.2384 High: 1.2495 Low: 1.2380 Close: 1.2492

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.2111 1.2272 1.2351 1.2471 1.2579 1.2674
  • GBP/USD has posted slight gains in the Asian and European sessions. The pair trade continues to move upwards in North American trade
  • 1.2351 has strengthened in support following gains by GBP/USD
  • 1.2471 is a weak resistance line. It could break in the North American session

Further levels in both directions:

  • Below: 1.2351, 1.2272, 1.2111 and 1.1943
  • Above: 1.2471, 1.2579 and 1.2674
  • Current range: 1.2351 to 1.2471

OANDA’s Open Positions Ratio

GBP/USD ratio is unchanged in the Monday session. Currently, long positions command a majority (62%), indicative of trader bias towards GBP/USD continuing to move upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.