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Market Analysis: Uncertainty around Brexit remains, but GBP/USD nevertheless bullish

March 15, 2019 10:30

Today's economic events calendar

Source: Economic Events March 15, 2019 - Admiral Markets' Forex Calendar

Even though it appears at first glance that nothing new has come from the recent Brexit talks, the chances of a deadline extension a 'Soft-Brexit' deal look to have increased – at least it has in the eyes of market participants, who pushed the pound/dollar currency pair to its highest levels since July 2018.

Theresa May couldn't find a majority for her second deal last Tuesday, being voted down with 391 to 242. Parliament also rejected a no-deal Brexit on Wednesday, and voted for an extension of the Brexit deadline past March 29.

While the amendment is not legally binding, and does not on its own change the Brexit deadline, as a tweet from European Commission president Tusk describes, but this also suggests that the EU does not want the UK to leave without a deal.

With such a potential deadline extension in mind, and both sides clearly favouring a deal (even though the EU clearly points towards the UK), the GBP currently seems undervalued particularly next to a weak-seeming US dollar.

That said, a break above 1.3350/3400 in the coming days seems likely, and if the next week's UK economic data convinces the BoE to keep the stated 'wait-and-see'-approach, a push up to 1.3600/3650 seems likely.

From a technical perspective, this bullish scenario is sustained as long as the GBP/USD trades above 1.2950.

GBP/USD index daily chart

Source: Admiral Markets MT5 with MT5-SE Add-on GBP/USD Daily chart (between December 12, 2017 to March 14, 2019). Accessed: March 14, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of the GBP/USD fell by 5.9%, in 2015, it fell by 5.4%, in 2016, it fell by 16.3%, in 2017, it increased by 7.4%, in 2018, it fell by 5.6%, meaning that after five years, it was down by 22.9%.

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