- GBP/USD plummets amid hard Brexit fears.
- Conservatives’ victory will help the UK PM pass the bill to rule out EU transition beyond 2020.
- UK employment data, political headlines will be the key to watch.
GBP/USD nosedives more than 60 pips to 1.3265, currently around 1.3280, amid initial trading hours of Tuesday’s Asian session. The pair might have come under pressure amid fresh fears of hard Brexit.
With the Tory majority in the United Kingdom’s (UK) Parliament, the Prime Minister (PM) Boris Johnson will have a smooth-running through the bill that rules out extension of EU transition beyond 2020. The Withdrawal Agreement Bill (WAB) is widely expected to be put for a second reading in the House of Commons on this Friday.
Read: UK PM Johnson to enshrine 2020 Brexit date in law – The Telegraph
While the Conservatives’ leader Johnson will not hesitate to reiterate his pledge to leave the region with or without a deal before 2020 ends, negotiators at the European Union (EU) have always criticized the British approach while considering the lack of time. Even so, the UK PM has repeatedly promoted the idea of Canada-style free trade arrangement and may push for the same after the Bill gets the Parliaments’ approval, which is most likely.
ITV’s Robert Petson considers the WAB as a risk to soft Brexit while saying, “Johnson is intent on honoring the Tory manifesto commitment to terminate the transition in just over a year from now. This will be seen as increasing the risk there will be in effect a no-deal trade relationship with the EU in 2021, with the UK having to incur painful EU tariff payments, because EU negotiators and leaders have warned there may not be time to negotiate a comprehensive free trade agreement by the end of next year.”
Moving on, investors will seek more clues of the recent drop of the British pound (GBP) from the political headlines. However, monthly releases of the UK employment numbers will also be the key to watch. “A busy week of UK calendar is worth watching ahead of the Bank of England policy meeting on Thursday. The consensus is for the unemployment rate to tick up to 3.9% while wages growth eases a little to 3.4% YoY,” says Westpac ahead of the data release.
Technical Analysis
Sellers may target December 12 top, near 1.3230, ahead of looking for 10-day Exponential Moving Average (EMA) around 1.3200 and May month high close to 1.3180. On the contrary, the recent high of 1.3515 becomes the tough nut for buyers to crack.
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