The Pound Sterling Rebounded During The Session Ahead Of The Most Awaited Speech By The British Prime Minister.
The pound recovered in early Asian trading on Tuesday ahead of a widely anticipated speech by British Prime Minister Theresa May, reporting her 12 priorities for Brexit that will include leaving the European Union’s (EU) single market and customs union.
GBP/USD changed hands at 1.2080, up 0.26%, while USD/JPY traded at 113.80, down 0.35% on a persistent safe haven demand for yen. Meanwhile, AUD/USD changed hands at 0.7501, up 0.31%.
The U.S. dollar index, which gauges the dollar’s strength against a basket of major currencies, declined 0.26% and traded higher at 101.22, up 0.31%.
Sterling has fallen overnight, markings its lowest levels since the flash crash in October as investors remained wary over Brexit, while the safe haven yen strengthened amid uncertainty over President-elect Donald Trump’s plans to improve the U.S. economy.
The pound declined ahead of British Prime Minister Theresa May’s speech on Tuesday where she is expected to give details on her “hard Brexit” plans from the EU.
Subsequently, investors are worried that May will outline plans to sacrifice access to the single market and the customs union to redeem control over immigration and bilateral trade deals in the said “hard Brexit”.
Volatile Market Is Anticipated
Ahead of the most awaited speech by the British Prime Minister Theresa May, which is expected to outline her priorities for Brexit, the market is therefore anticipating a volatility on Cable today.
The pound sterling was trading below the previous key range at $1.2080 in yesterday’s session, which stood at $1.2043, marking the lowest level since 7th October. Additionally, prices slightly spiked to $1.1450 with the recent flash crash.
Technically, the outlook is setup for selling into any strength and the rebound today could be a sign of an opportunity.
The caveat will be the volatility during the speech, and “hard Brexit” stance is expected to steady and retest $1.2000 level again with the low at $1.1980.
Meanwhile, economic data front inflation is announced with UK CPI, and is anticipated to surge to +1.4 from an earlier reading of +1.2% on a headline basis, although core CPI is expected to steady at +1.4%.
The chart below illustrates the price movement of the GBP/USD price movement ahead of May’s speech on giving signals to her “hard Brexit” plan.
Given a rebounding phase, market participants are expected to close any positions before the most awaited speech by the British Prime Minister as the market is widely anticipated to become volatile.
Conclusion
With investors spoiling to sell their positions, any signs of break through above 1.21709 could send some investors to reiterate their rating as it would mean an attempt of recovery or consolidation.
The pair is currently changing hands in a heavy trading volume and RSI nearly stood at level 47.0194, which could be another sign of recovery until it breaks above the 50 level.
So far, investors are advised to close current positions as the market is expected to become volatile during May’s speech.