Brexit Woes Rise As US Bond Yields Continue To Pressure Sterling

Market this week hasn’t been in favor of GBP so far when US dollar is concerned. There hasn’t been any major news in UK yet to cause existing momentum to take a break. With no major data reports from the UK yesterday, GBP’s performance has largely reflected the generally stronger USD tone. Even when looking back at data released on Monday and Tuesday there hasn’t been any news with much impact on market. The UK macroeconomic calendar has nothing major to offer today as well. Although Brexit Secretary, David Davis, hit the wires with some headlines earlier this week none of them was a shocker. Among other things, Davis said that a solution to the Ireland border issue is not needed until at least October, also saying that the UK could negotiate a trade deal before Brexit, considering that if the UK has to extend its membership for a customs union that will be considered a failure.

GBPUSD Under Pressure

While UK’s current situation over Brexit talks was mentioned above many Analysts believe that Brexit woes will continue to hold down GBP on bear’s territory over even longer time frame due to key aspects still left un-resolved such as the problem of the UK’s border arrangement with Ireland which many believe may not be resolved until after the UK leaves the EU. It remains to be seen if this is acceptable for other parties involved in the talks as EU as already rejected a proposal suggested by UK Prime Minister Theresa May earlier this month.

This week saw US dollar gain over major currencies across the globe as increase in 10 year US treasury bill yield which hit a 4-year high early this week has give the greenback a stable support on its bull run and this has caused traders to bet on US across multiple currencies leading to USD gaining further strength and adding pressure to GBP. Sterling is expected to continue moving on downward path during today’s trading session. Investors are currently waiting for tomorrow when the UK will release its Q1 GDP figures before deciding further on Pound. In long term the public belief remains bearish as interest decision meet to be held by Bank of England of May 10^th 2018 is expected to keep make no changes in interest rate.

This sentiment increased further as Michael Saunders, a hawkish member of the Monetary Policy Committee made a dovish remark stating “the UK rates probably need to move over time to something more neutral, but not too quickly”. Today’s session is expected to move across the day in bear’s favor. Expected support and resistance values for GBPUSD are currently at 1.3920 & 1.3880 and 1.3965 & 1.3990 respectively.