While the inconclusive UK elections sent the pound on political uncertainty, some hope for a softer Brexit emerged. And indeed, we are beginning to hear some positive signs.
The British Chancellor of the Exchequer Phillip Hammond has put jobs as a priority in the Brexit negotiations. Maintaining access to the single market will help job creation. Is this an over-interpretation of his words?
Perhaps, but we also learned that Hammond will go for a softer stance regarding the negotiations. According to Bloomberg, the UK now accepts that the negotiations will first start by discussing the divorce deal before talking about a future trade agreement. This is clearly a softer stance, if not on the future arrangements, at least it is an agreement on the talks.
GBP wants a softer Brexit
While the elections moved away from Brexit to the NHS and then to security, some analysts see May’s failed gamble as a rejection of a hard Brexit. This has kept the pound bid.
Sterling is already responding positively to the news about negotiating the Brexit deal. The pound is up against the dollar, but this may also be related to not-so-convincing US housing figures.
What’s next? Brexit negotiations are set to begin on Monday, starting before the Queen’s Speech in the UK. That is good news for the pound. Given past experience, we can expect lots of leaks from the negotiations. Without any huge economic indicators, leaks will have the upper hand.
Cable is currently trading around 1.2775, just above the battle line of 1.2770. Further resistance is at 1.2825, the post election results high. It is followed by 1.29 and 1.2980.
Support awaits at 1.27 and 1.2615.
Here is the 30-minute chart of GBP/USD. Click to enlarge:
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