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Sterling Stumbles at European Open

Market Analysis

GBPJPY, H1                 

Sterling has come under particular pressure, posting losses against the euro and yen, in addition to the dollar. This follows the House of Commons rejection of a proposed amendment to the Brexit bill that would have forced the government to seek parliamentary approval in the event that the UK is forced to leave the EU without a new trade deal. This means that the government will be free to exit the EU on WTO terms in the event that no new trading terms have been agreed on at the end of the two-year negotiating period. There was also the confirmation overnight that the Scottish National Party plans a second Scottish independence referendum in late 2018 or early 2019. However, the SNP need the approval of the UK parliament before any referendum can be scheduled, something that at this point is unlikely.  The main patient in this rising uncertainty is the pound.

Cable has logged an eight-week low at 1.2123, while EURGBP has rallied back towards the eight-week high seen last week at 0.8787 and GBJPY broke the key 140.00 level and traded as low as 139.40.  The 1 hour GBPJPY chart shows a key level at 139.83 and a possible pivot low forming from those long lower wicks earlier one to watch with interest over the coming hours.

 

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Stuart Cowell

Senior Market Analyst

HotForex

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