Some quick thoughts ahead of Theresa May’s Brexit talk at 13.30 GMT
This is potentially a big event for the pound and one to watch carefully. A lot of the basis of the speech has been out for the last day or so. The main rhetoric is that it’s a speech predominently on achieving unity within her own party and the country but it will also focus on how the UK is going to continue negotiating with the EU. Once again the negotiating power is in Europe’s favour. Their message to the UK is “you give us your plans, and we’ll judge whether they are workable or not”. It will be this that the market will be looking for. Either May will offer tones that fit in with the what the EU wants to see from the UK or it will be more flim flam unclear posturing that will be instantly dismissed by the EU.
The country also wants a straight view from May, and that’s what will drive the market. If she’s strong, clear and decicive about what the UK is prepared to do, and it’s not too far from the EU line on things, the pound will rally. If it’s indecisive and far apart from the EU, the market is going to make the quid suffer.
On balance, I see more negative news coming than positive. A lot of the market is looking for a “Florence” style performance but I can’t see that coming. As a Brit, I hope we do get something like that but as a trader, I’m dubious based on how things are going at the moment.
The pound may flip flop between the comments but it will be when she’s finished that we might get the definitive move. There’s a big risk of a big price move in either direction so picking the levels might be tough. I’ll be watching for any positive news to hit resistance up around 1.41 or 1.42, and negative news could bring a test of the 1.36/1.35 area.
GBPUSD H4 chart
I’ll repeat once again, don’t get too sucked into the moves over the speech unless there’s a clear big positive or negative outcome, and be ready for when she finishes and the market reacts to the whole event.
Good luck and stay safe.
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