GBP/USD – British pound soars as parliament rejects no-deal Brexit, next stop is Article 50

GBP/USD continues to show strong movement this week. In Thursday’s North American session, the pair is trading at 1.3280, down 0.40 percent on the day. The pair soared on Wednesday, gaining 1.99 percent. On the release front, there are no major British indicators. Later in the day, parliament holds a vote over Brexit for a third straight day. In the U.S., unemployment claims climbed to 229 thousand, above the estimate of 225 thousand. On Friday, the U.K. releases consumer inflation expectations, and the U.S. publishes the Empire State Manufacturing Index and UoM Consumer Sentiment.

It has been an extraordinary week in British politics, as the turmoil over Brexit has reached a fever pitch. On Tuesday, lawmakers narrowly voted to remove the option of a no-deal Brexit. This vote is not binding on the government, but it’s clear that most MPs do not want a hard Brexit, in which Britain crashes out of the European Union without any agreement. Next stop on the parliamentary train is a vote on Thursday to extend Article 50, the mechanism of the Brexit withdrawal. Britain is currently scheduled to leave the E.U. on March 29. However, even if Article 50 is extended, the uncertainty will continue, and we can expect additional parliamentary votes next week. On the European side, all 27 members of the E.U. have to agree to an extension. It’s not clear how long an extension would last. Senior European officials have said that the extension could be a year or longer, but pro-Brexit MPs may balk at such a long period. There is also talk of a second referendum on Brexit. In short, a chaotic situation which could trigger further volatility from the pound.

In the U.S., consumer inflation remains soft, which means there is little pressure on policymakers to raise rates in the near future. In February, Core CPI edged down to 0.1%, while CPI remained steady at 0.2%. Consumer inflation remains well below the Federal Reserve’s target of 2.0 percent, so there is little pressure on the Fed to raise rates anytime soon. Policymakers have been signaling that the Fed could stay on the sidelines until the second half of 2019, and this stance was underscored by Fed Chair Powell in a television interview on Sunday. Powell left no doubt about where the Fed stands, saying that the Fed would remain patient and was in no hurry to change interest rate policy. The dovish stance of the Fed could weigh on the dollar, as a lack of rate hikes makes the greenback less attractive to investors.

Global markets gently simmer

Brexit and Trade Continue to Weigh on Growth Concerns

Trade Deal Delay

GBP/USD Fundamentals

Thursday (March 14)

  • 6:37 British 30-year Bond Auction. Actual 1.74/2.3
  • 8:30 US Import Prices. Estimate 0.3%. Actual 0.6%
  • 8:30 US Unemployment Claims. Estimate 225K. Actual 229K
  • 10:00 US New Home Sales. Estimate 622K. Actual 607K
  • 10:30 US Natural Gas Storage. Estimate -211B. Actual -204B
  • Tentative – Parliament Brexit Vote- Pass

Friday (March 15)

  • Tentative – British Consumer Inflation Expectations
  • 8:30 US Empire State Manufacturing Index. Estimate 10.1
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.5
  • 10:00 US JOLTS Openings. Estimate 7.27M

*All release times are DST

*Key events are in bold

GBP/USD for Thursday, March 14, 2019

GBP/USD March 14 at 12:25 DST

Open: 1.3337 High: 1.3337 Low: 1.3208 Close: 1.3280

GBP/USD Technical

S1 S2 S1 R1 R2 R3
1.3070 1.3170 1.3258 1.3362 1.3460 1.3539

GBP/USD posted considerable losses in the Asian session. The pair ticked lower in European trade. GBP/USD is showing movement in both directions in the North American session

  • 1.3258 was tested earlier in support. It is a weak line
  • 1.3362 is the next resistance line
  • Current range: 1.3258 to 1.3362

Further levels in both directions:

  • Below: 1.3258, 1.3170, 1.3070 and 1.2910
  • Above: 1.3362, 1.3460 and 1.3539

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.