GBP/USD: Pound Correct Its Growth Despite Brexit Delay

The pound is on the move to give away some recent gains, potentially heading to 1.3050 area to USD.

British Parliament voted to send Theresa May to Brussels to ask for a Brexit respite. This step should also be considered as an attempt to buy some time to increase the number of her supporters. At the same time, the Parliament once again blocked the new referendum. These events probably became the main reason for the weak pound performance after the final vote.

GBP remains near 1.3240, the highs of the last eight months.

What’s next with Brexit?

Next Tuesday, the twice rejected plan will face with the third vote. If the exit plan won’t be approved this time, May will go to Brussels to ask for a Brexit date postpone. It is likely that the EU will give this time to the U.K., but still, the possibility of ‘no’ cannot be completely excluded.

It is predicted that if by March 20, the British Parliament adopts EU divorce plan, the exit itself will occur on June 30. If the head of government fails to enlist the support of the majority of parliamentarians, Brexit can be shifted to a later date. Again, if the EU agrees.

What does technical analysis say?

It is difficult to say that the markets were afraid of such uncertainty, but still, it is worth paying attention to the GBP vulnerability. Earlier in the week, the British currency reached 8-month highs against the dollar, and is now vulnerable to a correction, rolling away from recent peaks.

Earlier this day the GBP/USD pair fell to 1.3200 against the peak 1.3280 on Wednesday. As for the technical analysis, the pair is in a trend for growth, with support around 1.3050. The caution of the players before the next week opens the way to a decline in this area. Falling below 1.30 may open the way to a deeper decline with possible testing of 1.2500.

Alexander Kuptsikevich, the FxPro analyst