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Market Overview
Limber Brexit sheds optimism on pound
The epic Brexit is finally close to resolution. The United Kingdom will leave Europe Jan. 31. The UK Parliament approved the law and European Parliament due to approve it next Wednesday. So, on Jan. 31 the UK will be set free. Not completely while Britain should abide the EU laws until the end of 2020 when a new trade deal between the parties expected to be approved.
Nevertheless, the limber Brexit scenario after the UK Prime Minister Boris Johnson secured the majority in the Parliament with a goal to bring Brexit to its final.
Transparent and smooth path of the Brexit gave an optimistic momentum to the Cable bringing GBP/USD from 1.2960 on Monday above 1.31000 level. As long as the Brexit will be heading smoothly towards its resolution the less impact it will have on the British currency and Euro as well. More traditional and fundamental issues such as economic indicators and Bank of England actions will play the determinant role.
One of such factors is expected publication of leading PMI indicator data Jan. 24 that reflect business sentiment in the UK. The ridge of 50 points is crucial and expected to be overpassed by 0.5 points (to 50.5), first time since September 2019.
The positive data could support the upward trend for the Cable that was delivered last August bringing GBP/USD to strong resistance levels of 1.3200-1.3250. Any disappointment in the outcoming data could prompt an alternative scenario to pressure GBP/USD to 1.2900-1.2950 resistance zone. Once this support is broken the pound could fall further to 1.2770-1.2820.
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