UK PM May is set to face down rebels in her own party as she pushes for the Commons to ignore the amendments suggested by the Lords. If she is successful, and the Lords approve the unrevised Brexit Bill, it could receive Royal Assent and clear the way for Article 50 to be triggered as soon as Tuesday.
From an FX perspective, the GBP is unlikely to be much perturbed by the event itself, as the market already is primed for it. Instead, it is likely to be factors such as the outlook for negotiations, prospects for a second Scottish referendum, and the extent to which economic data continue to deteriorate that shape the GBP going forward.
We look for a near-term bounce, but the broader bias stays lower to test 1.1988/82. GBPUSD continues to find some stability ahead of trend support from the September 2016 peak, now at 1.2080, and strength overnight above 1.2196 has seen a small base complete. We look for this to provide the platform for a recovery to 1.2253, then 1.2302/11 – the 38.2% retracement of the decline from late February and price resistance. We look for this to then cap, for a fresh move lower.
Support shows at 1.2196 initially, with a break below 1.2135/34 needed to reassert the downtrend for 1.2080, ahead of a retest of more solid levels seen at 1.1988/82 – the 61.8% retracement of the October/December 2016 rise.
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Although we would look for a fresh hold here, a break would warn of a more significant downturn, for 1.1855 initially.
Strategy: Sell at 1.2300, stop above 1.2406, for 1.2100.
