GBP takes another beating ahead of more Brexit talks

Market News

Focus remains on GBP at the start of this week after GBPUSD dropped 1% on the open yesterday evening, dipping below 1.2000 and remaining soft overnight. The catalyst came from numerous newspaper articles over the weekend speculating around Theresa May’s Brexit speech tomorrow (time TBC)

• The articles alluded to the continued “hard Brexit” stance of May, emphasising the potential of leaving the single market and the Customs Union, as well as potential of stepping away from abiding by the European Court of Justice after the 2-year Article 50 period
• With a lot now priced in for a “hard” stance from May during the speech, GBP could rally if her rhetoric is softer than expected. Resistance in GBPUSD comes in at 1.2080, ahead of 1.2250 and 1.2440.  Support below 1.2000 is less clear but our traders look for short term support at 1.1983 (overnight low), ahead of 1.1800 and 1.1500

Also this week, we could get the Supreme court ruling on Article 50, as the decision has to be announced by mid January

• A ruling for an active role of the UK parliament in triggering Article 50 is already largely priced in sterling, in our view
• However, there is a low but non-zero probability that the Supreme Court could also force the government to secure approval from devolved institutions to trigger Article 50 (Scotland, Northern Ireland). Such an outcome would likely delay Brexit and drive a rebound in GBP

On Friday, attention will turn to Donald Trump’s inauguration which will officially mark the beginning of a new era for US politics

• Markets will follow closely follow Trump’s inaugural speech in order to get any piece of information regarding the direction of his administration, although this might not be the ideal setting for specific policy discussion
• Market attention in coming weeks will likely be on tax reform and the potential implementation of protectionist trade policies

via Barclays

Today’s currency rates: