Is the UK getting closer to a softer Brexit? The government has already “climbed down” from a firm objection to having foreign courts making judgements on British matters. “Blurring the red lines” by the government has now been compounded with an end to ambiguity by the opposition.
The Labour Party announced it is ending its constructive ambiguity. The party managed to gain votes from Northern Brexit supporters by allowing for curbs to immigration while appealing to young Londoners that are firmly pro-Remain by offering a liberal stance. Well, the party focused on other topics rather than Brexit.
And now, Labour ends the ambiguity by supporting a softer Brexit: a transitional deal that provides access to the single market and the customs union. Implicitly, this implies an openness to immigration.
By positioning itself as the “Party of Soft Brexit”, it puts pressure on the government. After the June 8th poll, Theresa May rules with external support from the DUP.
GBP recovers
The pound was quite a loser in the past few weeks, even to the sliding US dollar. EUR/GBP reached the highest levels since 2009. But with these moves by both the government and the opposition towards a softer Brexit, the pound is on the rise.
GBP/USD commenced the week with Sunday gap above 1.29, and despite closing the gap and drifting under 1.29 to 1.2873, the pair is on the move once again, trading around 1.2915 at the time of writing.
USD falls
The weekend gap came from around 1.2880, a level the pair had reached on Friday thanks to the weakness of the US dollar. Fed Chair Janet Yellen did not mention anything related to monetary policy. Without insisting on raising rates as planned, the US dollar sold off.
The troubles of the US dollar also stem from Trump’s issues. His inappropriate response to the terror in Charlottesville and the disbanding of his economic councils had already weighed on the dollar.
GBP/USD – where next?
While the pair is on a higher ground than last week, it still struggles. The UK economy is not at its best and this isn’t likely to improve anytime soon.
On the topside, we find 1.30, the round number, followed by 1.3050 and 1.3110, levels that characterized the pair’s trading early August.
Support is found at 1.2820 and 1.2770, levels that provided support just before the recent rise.
More: GBP: Brexit Round 3 Showdown Weighing On GBP; What’s Next? – BTMU
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