Brexit Stalemate Deepens as Parliament Rejects all Alternatives

With none of the indicative votes gaining a majority, the options in moving forward are becoming increasingly limited, with speculation in the air of a general election down the line. While MPs plan to trim the list of options and vote again on Monday.
Lukman Otunuga

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The drama, confusion and sheer uncertainty over Brexit intensified yesterday evening, after British MPs rejected all eight options aimed at breaking the Brexit deadlock.

With none of the indicative votes gaining a majority, the options in moving forward are becoming increasingly limited, with speculation in the air of a general election down the line. While MPs plan to trim the list of options and vote again on Monday, the clock is ticking with the risk of a no-deal Brexit rising by the day. Although Theresa May has pledged to stand down by May 22 if MPs back her plan, it still remains uncertain whether Commons Speaker John Bercow will allow her deal to be brought forward for the third time on Friday. If May’s deal is rejected once again and Parliament is unable to agree on anything, the UK could slip into a no-deal Brexit which will have severe consequences on the British Pound.

Sterling tumbled yesterday evening as Brexit uncertainty haunted investor attraction towards the currency. However, looking at Sterling’s overall price action, it does feel like the risk over a no-deal Brexit is underpriced. The year-to-date uptrend for GBPUSD is still intact despite the twist and turns. There have been higher highs and higher lows so far in 2019 with prices trading around 1.3162 as of writing. While the GBPUSD has the potential to challenge the 1.3300 resistance, further gains beyond this point are likely to be limited by Brexit developments.

Dollar running on borrowed time

Even as markets heed the Fed’s dovish tone and have ramped up expectations of a US rate cut as soon as September, the Dollar Index has repeatedly tried to break above the 97.0 handle.

Although the Dollar has been resilient in recent months, it may be time for bulls to throw in the towel as concerns mount over the health of the US economy. With the US Treasury yield curve inverting at the start of the week, warning lights are flashing over the largest economy in the world potentially entering a recession. These lingering fears are likely to dampen appetite for the Dollar as investors park their money elsewhere.

Should there be further confirmation of the largest economy in the world cooling or the Fed remaining firmly dovish, the Dollar may lose its grip on the throne.

Commodity spotlight – Gold

It has not been the best of trading weeks for Gold, with prices trading around $1311 as of writing. Although a stabilizing Dollar during the early parts of the week dragged the metal lower, the medium to longer-term outlook favours bulls. With global growth fears and geopolitical risks weighing on investor confidence and market sentiment, Gold will remain a destination of safety for investors. In regards to the technical picture, bulls remain in control above the psychological $1300 with a breakout above $1313 opening a path towards $1324.

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

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