GBP/USD rebounds back to the 1.2850 area as attention turns to UK Parliament

• Pound stabilizes around 1.2850 after sharp moves.  
• The Brexit deal now goes to UK Parliament: volatility around GBP’s crosses set to remain elevated.  

The GBP/USD pair rose back above 1.2800 after finding support at 1.2750. Price action remains volatile following the Brexit deal. Initially, optimism pushed Cable sharply higher but then, uncertainty about Saturday’s UK Parliament vote weakened the Pound. After sharp moves, GBP/USD is modestly higher for the day, up for the third-day in-a-row, far from the highs.  

Brexit deal achieved but the drama is not yet over  

Finally, the United Kingdom and the European Union (EU) reached an agreement. Now attention turns to the UK Parliament that will vote on the deal on Saturday. “Brexit is set to continue rocking GBP/USD as the focus moves to Westminster. There are four different scenarios (parliament approves the deal; deal rejected, extension, elections called; deal supported but conditioned on a referendum; deal rejected, no-deal exit) and markets will move ahead of the special vote on Saturday and also after the weekend. High volatility is set to prevail”, wrote Yohay Elam, analyst at FXStreet

“Despite Prime Minister Johnson’s deal being unlikely to pass Parliament on Saturday, we believe the tail risk of a no-deal Brexit even after a potential election has diminished further. This also partly explains the positive risk rally we have seen on the renewed Brexit optimism. While we previously feared a Johnson victory in a snap election would lead us to a no-deal Brexit, this is no longer the case. In our opinion, it is difficult to see a path to a no-deal Brexit now“, explained analysts at Danske Bank.  

Despite GBP/USD moved off highs, it still holds in positive territory for the day and more than five hundred pips above the level it had a week ago, reflecting how expectations have changed, although the Brexit drama is not yet over.  

Levels to watch  

The bias continues to point to the upside but the bullish momentum eased over the last hours. The area around 1.2750 has become relevant in the short term and a firm break below would clear the way to a correction. The next support might be seen at 1.2660. On the upside, above 1.2890, the Pound could gain momentum, and attention would turn to the 1.3000 zone.