GBP/USD – Pound Pushes Higher on Brexit Speculation

GBP/USD has started the week with gains. In Monday’s North American session, the pair is trading at 1.2230. There are no economic events in the US or the UK. On Tuesday, the sole release is US PPI, with the markets expecting a weak gain of 0.1%.

There is increasing speculation that Theresa May’s government may pull the Brexit trigger on Tuesday and invoke Article 50, the mechanism for initiating Britain’s departure from the European Union. The government still has some house tidying to do, as the House of Lords made some changes to the government’s Brexit legislation. Prime Minister May, who has repeated that she will trigger Article 50 in March, has argued that the government needs to be free of any restrictions in order to obtain the best possible deal for the UK. Under Article 50, the negotiations are slated to take up to two years. Relations between Britain and the EU have nosedived since the stunning Brexit vote in June. The timing of invoking Article 50 comes at a particularly delicate time for Europe, as the Netherlands holds elections this week and France goes to the polls in April. If Tuesday is Article 50 Day, the pound could post strong gains against its major rivals.

It’s full steam ahead for the US economy, buoyed by a red-hot labor market. On Friday, Nonfarm Payrolls sparkled with a gain of 235 thousand. This easily beat the estimate of 196 thousand. The strong release makes it a virtual certainty that the Fed will raise rates by a quarter-point on Wednesday. Although a rate hike has been priced in by the markets, there have been disappointments in the past, so a rate move will likely give the dollar a boost against its major rivals, such as the euro. The solid job numbers also give President Trump a much-needed boost. Trump is under pressure to present an economic agenda, but the markets won’t mind giving him some additional breathing room with the economy performing well.

GBP/USD Fundamentals

Monday (March 13)

• There are no events in the US or UK

Upcoming Key Events

Tuesday (March 14)

• 8:30 US PPI. Estimate 0.1%

*All release times are GMT

*Key events are in bold

GBP/USD for Monday, March 13, 2017

GBP/USD March 13 at 11:30 EST

Open: 1.2169 High: 1.2240 Low: 1.2155 Close: 1.2236

GBP/USD Technical

• GBP/USD edged higher in the Asian session and posted stronger gains in European trade. The pair continues to move upwards in the North American session
• 1.2143 provided support
• 1.2272 is the next resistance line

Further levels in both directions:

• Below: 1.2143, 1.2033 and 1.1943
• Above: 1.2272, 1.2351, 1.2471 and 1.2579
• Current range: 1.2143 to 1.2272

OANDA’s Open Positions Ratio

In the Monday session, GBP/USD ratio is showing long positions with a majority (72%). This is 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.