GBP Vulnerable: Caught between the rock and the hard place

GBP Vulnerable: caught between the rock and the hard place. The rock hanging on the Great Britain Pounds neck is the Brexit vote and series of unpredictable outcome to leaving the EU while the hard place is the Scotland and talk of another referendum.

10 January, AtoZForex – On the weekend, PM Theresa May once again reiterated the UK is leaving the EU. She has remained steadfast despite occasional flaps of political trouble and she is increasingly warning that it won’t be easy. May said that maintaining border control was non-negotiable even if it meant losing access to the single market. At the same time, Scotland’s Sturgeon is exploiting every opportunity to promise another referendum, especially once Britain leaves the EU.

GBP Vulnerable; key points of May’s Sky interview

“In a SKY interview PM May stated that UK could not expect to hold on to “bits” of its membership after leaving the EU, seeming to stress the “hard Brexit” line that the UK would not compromise on the immigrant issue in return for access to the single market. Meanwhile, Scotland’s First Minister Nicola Sturgeon warned the Prime Minister that she was not “bluffing” over the prospect of a second Scottish independence referendum, Scotland voted to stay in the EU and the idea of a “hard Brexit” is clearly unappealing to Ms. Sturgeon’s constituents.

The currency markets were clearly spooked by the heated rhetoric. As traders began to worry about the possibility of a hard Brexit and with the diminished UK. This drove GBPUSD well below the 1.2200 mark towards 1.2125, before finally finding some support. Yet, GBP remains highly vulnerable. Sensing that Ms. May may have overplayed her hand. The PM’s office quickly came out with a statement that the UK wants the best deal within a single market, trying to assuage the markets and reassure its intent to negotiate for some sort of access. With PM May trying to do her best Margaret Thatcher imitation prospects for some sort of a reasonable compromise appear bleak.” GBP/USD is highly vulnerable and appears poised for a move to 1.2080 and even much lower.

GBP Vulnerable: GBPUSD technical Outlook

GBP Vulnerable

GBPUSD technical analysis (click to zoom in)

Technically, more weakness should be envisaged for the cable as long as the fundamental risks remain. On the upside, 1.2300 level ( a broken rising trend line resistant) should cap any seen strength on the GBPUSD for a fresh attack on the 1.2080 support.

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