The British pound advanced just a bit when it became apparent that Donald Trump was in the lead but dropped when the greenback turned back up after it became official.
And now, the dust begins settling and the pound is on its own once again. Sterling decouples from the euro and other currencies and moves higher. GBP/USD tops 1.26 and has already reached 1.2673. EUR/GBP is plunging and trading at 0.8613. GBP/JPY is above 134.
Why? Just before the US elections, the pound enjoyed a “Super Thursday.” Data released on November 3rd showed that the services sector is humming along without any problem. Then, the UK high court ruled that parliament had to trigger Article 50, the legal route to Brexit. And finally, the Bank of England not only skipped cutting rates but went further by saying that rates can go either way, a very hawkish statement, especially in comparison to the recent doom and gloom.
Needless to say, the exit of the UK from the EU could have severe consequences for the UK economy, but this might take some time. In the meantime, we are nearing the initial post-Brexit lows.
The next line of resistance is at 1.2790, which is a bit far out. That was the first low after Brexit. The fall below this line happened only in October, and it was fast and furious: the flash crash sent the pair tumbling down quite quickly.
More: Trump Wins: Targets For AUD/USD, EUR/USD, USD/JPY, GBP/USD – Westpac
Here is the chart:
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