GBP/USD benefits from Brexit positive headlines, political uncertainty caps the rally
- Odds for soft Brexit increase as the EU and Ireland hold backdoor meetings with the Tory lawmakers.
- Geopolitical tension with Iran and doubts surrounding future Brexit developments still weigh on the British Pound (GBP).
With the Brexit positive news making the rounds during the weekend, the GBP/USD pair is on the bids around 1.2510 amid initial Asian trading session on Monday.
The Sunday Times reported that politicians from Ireland, Germany, and France are in contact with the UK Prime Minister (PM) hopeful Boris Johnson’s allies to establish a link that could avoid no-deal Brexit should the frontrunner win the race. Reuters also came out with the news quoting the EU Brexit negotiator’s readiness to discuss Irish backstop with the UK in the future.
While the EU and Irish diplomats’ efforts are increasing the odds for a soft Brexit and supports the Cable in turn, political uncertainty at home and abroad limits the pair’s further upside.
At home, the UK’s Chancellor of Exchequer Phillip Hammond recently said, as per the BBC, that he’ll resign the next day of Boris Johnson’s selection as the British PM.
Elsewhere, political tussle with Iran is also going on where the gulf nation seized two of the UK tanker, released one afterward.
It should also be noted that the US Dollar (USD) recovery on the back of declining odds favoring the Fed’s 50 basis points (bps) rate cut also plays its role to limit the pair’s upside.
Although major market expectations favor Boris Johnson to become the UK PM and go for a Brexit on October 31, fueling fears of a hard exit, political development concerning the issue and Wednesday’s Tory leadership voting result will be the key for near-term Cable moves.
Technical Analysis
A 21-day exponential moving average (EMA), at 1.2520, acts as an immediate upside resistance for the pair to clear in order to aim for mid-month top surrounding 1.2580 and 1.2600 round-figure. Should prices remain shy of the nearby resistance, 1.2460 and 1.2380 can continue to lure sellers.