Sterling remains gripped by Brexit jitters

January 24, 2017

Article by ForexTime

Sterling found itself under renewed selling pressures on Tuesday despite the British Supreme Court ruling that the UK government could not trigger article 50 without the Parliament’s consent. While it was widely expected that the Supreme Court would adopt such a stance, it was the fact that the court also ruled that the government did not need the approval of the devolved government bodies to trigger article 50 which revived hard Brexit fears. Although today’s ruling has provided some clarity in the short term on the steps needed for Brexit to happen; the pending Brexit fuelled debates with the Parliament and potential complications could create a new layer of uncertainty consequently weakening the Pound.

Since the historical vote to leave the European Union back in June 2016, the Sterling has been gripped by uncertainty which continues to haunt investor attraction. The buying sentiment towards the Pound has become frightening low with the engine behind the GBPUSD’s resurgence mostly attributed to Dollar’s vulnerability. The GBPUSD continues to display signs of exhaustion on the daily charts with technical bearish traders utilising the 1.2500 resistance level as a foundation to install heavy rounds of selling. If the downside momentum accelerates then the next level of interest on the GBPUSD will be the 1.2350 psychological level.

Political risks and risk aversion

The rising Trump fuelled uncertainties, ongoing Brexit developments and pending elections in Europe could ensure political risk becomes a major market theme in 2017. A major risk that has already gripped the global markets is the unknown over how President Trump may lead the US economy this year. In Europe, the threat of Eurosceptic parties grasping control could weaken the unity of the Eurozone while the Brexit developments have placed the Sterling on a nauseous roller coaster ride. If political risks continue to dictate market movements this year, then global stocks may end up subdued as risk aversion encourages investors to scatter away from riskier assets to safe haven investments.

Commodity spotlight – WTI

The rising US oil production which is sabotaging the efforts of OPEC and Non-OPEC countries to cut production has exposed WTI Crude to slight losses during Tuesday’s trading session. Although major oil producers on Sunday confirmed that 1.5 million barrels per day of oil have already been cut, the actions of US shale and the impact President Trump may have on the oil markets have left investors on edge. Oil prices remain quite sensitive to the risk tilted to the downside if concerns resurface over the oversupply in the markets. Technical traders could observe how WTI crude reacts to $52 with a breakdown below opening a path towards $51 and $50 respectively.

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Article by ForexTime

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