- “With the government in relative disarray, we could see short-term pressure on Cable,” – Analysts at Rabobank argued.
- Analysts predict that May will survive this crisis, strengthening the ‘soft Brexit’ mandate which is sterling positive.
EUR/GBP has been back on the back foot on Tuesday, dropping from the 0.8874 Asian highs to a low of 0.8819 in early NY trade. Cable has recovered from the Brexit resignation volatility lows down at 1.3189 and recovered all the way back to the 1.33 handle, (albeit short-lived, sinking back to 1.3226 late London, back to 1.3287 in NY trade).
EUR/GBP made a high of 0.8901 in NY trade yesterday, rallying on the resignation of UK ministers over UK PM Mays Brexit proposals her cabinet agreed on a blueprint for the future EU-UK economic relationship. The plan intends to de facto keep the UK in the EU Customs Union and Single Market for goods, though in an adjusted form.
The shift of the UK government towards a softer Brexit triggered the resignation of pro-Brexit ministers David Davis and Boris Johnson. The concerns for sterling bulls came with the sentiment that PM May’s leadership could be challenged with a vote of no confidence and raising the speculation of a hard Brexit. However, analysts predict that May will survive this crisis, strengthening the ‘soft Brexit’ mandate which is sterling positive.
IMM Net Speculators’ Positioning as at July 3rd, 2018
“GBP moved deeper into a net short territory. GBP longs actually rose on the week but the increase in short positions more than offset this driving net short positioning in GBP to the most stretched level seen since September 2017. Since these data were observed we have seen an exodus of ministers with Brexit Minister, David Davis, his Deputy, and Foreign Secretary, Boris Johnson, all resigning in protest at PM May’s latest Brexit vision. With the government in relative disarray, we could see short-term pressure on Cable,” – analysts at Rabobank explained.
EUR/GBP is well above the bearish triangle’s resistance but was rejected at 0.89 the figure and now testing the 200-D SMA at 0.8822. The 21-D SMA at 0.8809 guards 0.8700 and the double bottom lows at 0.8697. The support of the descending channel comes next while 0.8620 protects a run towards 0.8526 as being the 78.6% retracement of the move from 2017 on the wide. On the upside, the 0.9034 October 2017 high is a key area of interest.