GBP, Brexit and market sentiment trending points
- After a volatile day, which breached GBP/USD pair volatility index at its highest since July 2016, another volatile session would likely to chop the British currency further ahead of today’s (March 12th) Brexit vote due to be held on GMT 19.00
- Following an upbeat Asian trading session, which nudged the pound sterling again closure to 1.33 level, UK Attorney General Geoffrey Cox had said that the “legal risk” remained unchanged that UK would have no internationally lawful ground to exit the Irish backstop over the events of Brexit
- Beforementioned legal risk unveiled further risk for Theresa May’s chance of winning parliamentary approval and eased yesterday’s cheerful market sentiment, as GBP fell from 1.3250 level to 1.3010 during the morning European trading session under two hours, posting the pair’s highest volatility index since July 2016
- As PM May’s amended Brexit would unlikely to pass, which also added another 40 billion as penalization if Britain was to extend deadline, an aggressive drop of GBP unleashes itself yet again into the 1.30 region
GBP/USD Trader sentiment reversed ahead of Brexit uncertainty
After experiencing a heavy gain yesterday (March 11th), and in today’s (March 12th) Asia-Pacific trading session, which jolted the GBP forward closer to 1.33 level, market sentiment reversed radically in the late-morning European trading hours after UK Attorney General, Geoffrey Cox said that the last-minute legal assurance from EU Commission would have nothing to do with legal risks on Irish backstops. Irish Backstop is the legal insurance that the border between Irish republic and the Norther Ireland, which is a part of United Kingdom would remain as it was after Brexit.
His legal opinion had nose-dived sterling sharply lower and moderated risk appetite more generally, as the chances of UK PM May to experience another heavy Brexit defeat looks more likely. Ahead of another evening Brexit vote, the pound sterling was trading lower against most of the major currencies after posting heavy gains yesterday. Against the American Dollar, the GBP had been 0.80 percent down to 1.3085, while the single currency had also plunged sharply against Euro to 0.8626 pence per euro, down by 1.14 percent.
GBP/USD daily price chart
EUR/GBP daily price chart
For the rest of the day, GBP would likely to be highly volatile and might remain range-bound between 1.30-1.33, as it had been over the recent past. A rejection of Brexit amendment could not guarantee a downside, as last Brexit defeat for PM May had experienced a gain for the Great Britain Pound.
None the less, today’s market sentiment had been different as the investors felt insecure, as a much-hyped last moment EU Commission assurance could not prove to be as effective as it was intended. Instead, the legal assurance actually backfired and a Brexit rejection seems more likely to turn GBP lower into the 1.2950-1.2850 territory.
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[Disclaimer: The content of this article is personal opinion and should not be considered as investment advice or suggestion towards any trading activity.]