The British pound has been strongly bid over the last 24 hours as the market reacts to reports that Theresa May is close on delivering a Brexit deal. Reports surfaced yesterday suggesting that May’s team have found a potential solution to the Irish Backstop issue which could see current adversaries backing her deal.
According to U.K. journalists, leading Brexiteers Jacob Rees-Mogg and Steve Baker have been briefed on the “technological solution.” They have suggested that they would back such a proposal, saying “these arrangements could work.”
May Returns To Brussels
May has now returned to Brussels for further Brexit talks with EU leaders, hoping to secure the “legally binding changes” that parliament voted in favour of just a few weeks ago.
However, European Commission President Jean-Claude Juncker has reaffirmed his message that he doesn’t expect a “breakthrough” in talks, saying:
“There isn’t enough movement for me to be able to expect this to be a discussion with a concrete outcome… I don’t know what Mrs. May will communicate to me tomorrow.”
However, if May can persuade the EU to concede some ground over this new proposal, she could return to parliament with a deal that is acceptable to the majority of MPs. This would finally allow her to secure a full Brexit deal for the U.K.
May Considering Bringing Parliamentary Vote Forward
May is reportedly considering bringing the final parliamentary vote forward. This is in a bid to out-maneuver Conservative Remainers who are threatening to join the Independent Group formed this week by a group of seven breakaway labour MPs.
British foreign secretary Jeremy Hunt told reporters:
“The message is really to everyone that it is possible to find a way through this. Of course, it’s challenging, there are difficulties, but there is a solution. We can get this deal through Parliament if we can have a deal where the Attorney General can change his advice on the backstop. That’s going to be key to unlocking it. Our commitment to the Northern Ireland peace process is unconditional, but with vision and statesmanship on all sides this can be done.”
If May is successful in her talks with Juncker today, the amendments to the deal could be ratified by the EU at an EU-Arab summit being held in Egypt this weekend.
Technical Perspective
After breaking back below the upper trendline of the falling wedge pattern last week, GBP found demand and traded higher. Yesterday’s spike has now seen price moving back above the 1.3004 resistance level. While above here, the focus remains on the further upside with a break of 1.3304 eyed next. Mapping a projected ABCD move from the current structure gives GBP/USD an initial target of 1.3541, back up into the area of the September 2017 swing highs.
To the downside, support remains along the 1.2693 level where we have a raft of previous swing lows which should see buyers still active. Below there and the next key support will be a test of the supporting trend line running from November 2017 lows, August 2018 lows, and Q4 2018 lows. However, a test of this region would likely only come if May is unsuccessful in her talks in Brussels today and the risk of a no deal Brexit ratchets up.