The sterling has been one of the most watched currencies this year. This is because of the ongoing Brexit uncertainty in the United Kingdom. As you recall, Theresa May has been negotiating a Brexit deal with the European Union for the past two years. The deal was supposed to make it easier for the two sides once the UK divorces from the EU on March 29. On the one side, the EU was incentivized to make the negotiations tough, which would prevent other EU members from leaving the union. On the other side, the UK wanted a good deal.
To compound issues, the UK parliament is divided, with both sides disagreeing on key issues. The opposition party has always been pro-EU while most members of Theresa May’s party have been opposed to the union. This combination made it very difficult to have a good path towards Brexit.
Last week, Theresa May presented her proposal to parliament for approval. As expected, the bill was brought down by the members, who disagreed with her on the issue of backstop. She also survived an ouster bid brought by the opposition party.
Yesterday, she made another speech, presenting her plan B for the deal. In the plan, she announced that she will move on negotiating along party lines as her previous plan of doing bipartisan negotiations failed. It is impossible to see how a deal along party lines will pass. However, a silver lining is that most members don’t want to leave the EU without a deal. This raises the possibility of having a deal made before the exit date.
On the one-year chart below, the GBP/USD pair has moved a bit higher as investors place their bets on a deal being made. Last week, the pair reached the important milestone of 1.3000. That price was along the upper band of the Bollinger Bands. There is a likelihood that the pair may continue the upward trend and test the important resistance level of 1.3200.