Price action is jumpy as Brexit headlines are keeping traders (and algos) on edge
There wasn’t much in this headline here but it was enough for a good 30 pips pop higher in cable from 1.2930 to a high of 1.2961. At the start of a day, hopes of a November Brexit deal looked to be all but done and dusted. Fast forward eight hours later, suddenly all the headlines are priming a possible breakthrough in negotiations and a Brexit text will be agreed upon between UK and EU negotiators.
However, the main issue with a breakthrough in those negotiations is that it remains to be seen if it will fly with UK parliament members and pass a vote at the Commons.
The story here basically underscores the situation right now. We’re close to agreeing on the details of the Brexit agreement and it’s more of the case that the UK is looking to make concessions so that the EU will agree to a deal. But that means May will have to go against parliament’s wishes and surely it will present a massive challenge for her to win when it comes to a vote.
I expect the pound to rally on any hopes or positive news concerning a breakthrough in negotiations. However, the optimism will be tempered with once traders digest the fact that it could possibly mean that the deal will fail a meaningful vote.
If Cabinet does sign off on a deal, it would be a good sign for starters. But expect plenty of twists and turns along the way. Either way, for the time being, the tide is starting to turn and it’s looking more and more optimistic for the pound now and it’s hard to deny a further run higher if cable starts to move above the key hourly moving averages near 1.3000.