GBP/JPY: Under pressure as Brexit doubts increase after UK’s special Parliament session

• GBP/JPY struggles around multi-month top marked last-week.
• UK’s special Parliament session on Saturday favored Letwin Amendment, poured cold water on expectations of a meaningful vote on the Brexit bill.
• UK PM followed the law to request the Brexit extension, EU’s response awaited.

With the United Kingdom’s (UK) special Parliament session throwing a wild card to the British Pound (GBP) optimists, GBP/JPY begins the week on the back foot while taking rounds to 140.10 at the start of Monday’s Asian session.

Rather than a debate and vote on the UK Prime Minister’s (PM) Brexit deal with the European Union (EU), the British Parliament rather tabled and passed Oliver Letwin’s amendment. As per the Westpac, the amendment was intended to ensure that there could not be an unintended no-deal exit should the legislation around the proposed Withdrawal Agreement (WA) stutter and collapse.

As a result, the UK PM’s recent struggle failed to witness a happy weekend as he had to write a letter to the EU demanding another extension to the Brexit. The European Council President Donald Tusk confirmed receiving the letter but no reaction was conveyed. The EU leaders also met during the weekend but refrained from discussing delays while holding hopes to push over the deal, as per the market reports.

“European ambassadors met for all on the15 minutes this morning and did not discuss a new Brexit delay It is full-on ratification on the EU side mirroring the government’s push to get the deal across the line. If a longer political extension is needed beyond Feb 2020 because ratification breaks down or Johnson loses vote of no confidence than EU will need a summit – as early as 27/28 October. The most likely option, I am told is for EU to decide the Benn act’s three months extension is “technical” as long as early WAB votes go smoothly”, tweeted The Times’ Bruno Waterfield.

Hence, the Brexit drama will keep the GBP traders on their toes during the week with likely progress and a meaningful vote on the WA bill during the same period. However, the opposition Labour party is all set to attach another referendum during this week’s Parliamentary load and will add burden on the UK’s policymakers.

With this, risk tone remains a bit compressed with early Asian session witnessing little moves. Contrary to the sentiment was the South China Morning Post’s (SCMP) story signaling ‘concrete progress’ towards trade was deal in Washington.

Technical Analysis

Unless breaking below 200-day Simple Moving Average (SMA) level of 138.70, prices will keep aiming early-2019 lows nearing 144.00-143.80.