EUR/GBP bulls tighten their grip on Brexit angst
- EUR/GBP is currently trading at 0.9000 having traveled between 0.8961 and 0.9005 as the pound slides on the back of Brexit angst while UK PM May addresses MPs about Brexit in parliament.
- Risks are on the topside and the market stays bid near term while above the 0.8964 uptrend.
May has essentially reiterated her opposition to a second Brexit referendum and announced a new date for the meaningful vote as the 14th of January. However, many have been calling for a vote before the Christmas recess facing much opposition and criticism.
May was making her emphasis on how the backstop will not need to be triggered and if the backstop were to be triggered, it would be temporary, proclaiming that there is no plot to keep the UK in the backstop.
- GBP/USD softer as PM May gives a statement to House of Commons
However, the pressure on sterling is building upon the consensus that the UK will leave the without a deal. On the flipside, if sentiment for a second Brexit referendum grew, sterling would likely harden on the hope that Britons would vote to reverse Brexit.
Preparing for a second EU referendum
The Sunday Times reported over the weekend that "two of Theresa May's most senior allies are preparing for a second EU referendum behind her back". Ladbrokes currently quotes 6/5 for another UK EU referendum before the end of 2019; Paddy Power makes it an even bet. However, odds for William Hill for May's withdrawal agreement to be approved by MPs before Britain's scheduled exit from the European Union on March 30 are at 5/2.
Analysts at Commerzbank explained that EUR/GBP last week eased back to the near-term support line, today located at 0.8964:
"While we would allow for some near-term consolidation, the recent move higher does looks directional and we would expect to see the market challenge the 0.9101 August high. Above 0.9101 would target the top of the 2016-2018 channel at 0.9172. Risks are on the topside and the market stays bid near term while above the 0.8964 uptrend and the .8941 support (October high). Below 0.8900 lies the 200 day ma at 0.8839."