Uncertainty keeps the Pound on its Toes

Well, as I suspected on Monday, it sure has been a volatile week for the pound with the

GBPUSD moving rapidly at times on each and every political soundbite and parliamentary

voting outcome. The price has both surged and slumped at times during the past 5 days,

swinging in between a low of 1.2949 posted on Monday, to a high of 1.3381 set on

Wednesday.

However, the GBPUSD has steadied somewhat over the past 24 hours. Of course all those

GBPUSD moves have in turn helped the GBPEUR swing pretty rapidly at times too, with the

price range for the week so far set at 1.1526 to 1.1803. The high point was reached twice

during the week and now represents a level that could define a technically important

interim ‘double top’ which I can show you via a chart below.

As you can see, the two-time price spike to 1.18 has been met with strong selling each time

and that has forced it back on both occasions and now its jostling around 1.17 this morning

where it seems to be settling for the time being, but unless there is another push past 1.18,

then from a purely technical perspective, there is a risk of a relapse back down through

1.1550 from here.

As far as all the Brexit developments are concerned; whilst its no clearer where exactly

things will end up, it is surely as much in the hands of the EU now as to how things pan out

over the next fortnight ahead of the March 29 deadline. Clearly, the UK wants to delay the

process, but as I said before, that can only be achieved if there is a unanimous vote of

approval by the 27 EU member states.

In this respect I noted on social media during the week, that any veto of such approval

might just allow Teresa May another chance to get her bill through on a 3 rd or perhaps even

a 4 th attempt. On the other hand, unless an A50 extension is granted, it also keeps live the

prospect of a no deal exit- as you were then I suppose! Consequently, the pound now looks

quite evenly poised and highly pivotal to me.

Elsewhere the dollar has certainly taken a back seat and along with the JPY, has languished

as the week has progressed. Indeed, to reaffirm what I have previously noted, regarding

whether or not the 97.71 level on the USD index would cap the upside; I want to show you a

chart of that as well today, so you can see the price action I am referring to.

On this chart I have marked the 3 points at which the USD index has stalled at 97.70 over

the past 6 months, and so clearly we have a triple top in place here now and that is surely

still capping the upside for the dollar overall and readily explains why the EURUSD held onto

that important support area around 1.1187 last week. Whilst I still see no fundamental

reason for that, I also have to pay close attention to what the technical picture is indicating.

So, both levels could easily define the limit of the dollars gains for Q1 as we head ever closer

to the end of the period. Indeed, it could be that this also sets the tone for the dollar in Q2

as well.

However, as to how the second quarter pans out for the dollar and the EUR will largely be

data/event dependent from now on I think. Within that rests all the current topical issues

such as the trade talks with China and what developments occur on the North Korean

peninsular and how those and other upcoming news/events impact capital flow and risk

appetite generally.

As to how and what capital actually flows from one place to the next is slightly less clear

right now, but the equity markets generally are continuing to reap the benefit of what

certainly looks like a more globally benign interest rate outlook. That’s perhaps immediately

understandable, but slowing growth in Europe, China and elsewhere is surely not something

to underpin those markets in the longer term.

Important Economic Releases Due today

15/03- 10.00am Eurozone- Final CPI inflation reading for February

15/03- US University of Michigan March Consumer Sentiment