UK Parliament Votes To Extend Brexit Deadline

UK Parliament Votes To Extend Brexit Deadline
March 15, 2019

 

After the UK leaders rejected a no-deal scenario on Wednesday, the GBP/USD currency pair rallied to two-month highs. The uptrend, however, did not last long. By Thursday morning, the British pound began to decline against the greenback as investors awaited the crucial vote on the second Brexit referendum. With only 14 days remaining for Britain to exit the European Union and no common ground on how to go about it, the Parliament voted to extend the deadline for departure. But the confusion caused by the happenings is taking its toll on the GBP/USD currency pair, which slipped from an intraday high of 1.3329 to a low of 1.3207 before reversing some of its setbacks.

 

Brexit developments dominate the pound’s trend

The UK legislators voted yesterday to postpone the Brexit proceedings, recognizing that additional time is necessary to shatter the stalemate over Britain’s exit from the European Union. Members of Parliament endorsed (412 votes to 202) the strategic plan to delay Brexit. But eight Cabinet ministers and 188 of Conservative party MPs – over half of May’s parliamentary group -opposed it in a clear indication of the rivalries that continue to haunt the Conservative Party.

But a request for a new referendum was resoundingly dismissed by the legislators. It can be remembered that the Parliament has already turned down May’s withdrawal deal twice. Yesterday, the lawmakers further boxed her in by merely passing a measure that restrains any effort to leave without an agreement.

Even so, the cable dimly strengthened at the start of the European session amid speculations that the Northern Irish DUP was planning to endorse the Brexit deal of the government. The uncertainty over the postponement period, however, weighed on the pound as the President of the European Council, Donald Tusk, nudged for a significantly longer delay, while Theresa May opted for a shorter extension.

Prime Minister Theresa May will now call on European leaders to allow a postponement to Article 50, the judicial process under which the UK leaves the EU. Unless all the 27 remaining EU leaders endorse a delay, Britain is heading for a disorderly exit on March 29th.

May had unwillingly agreed to back a postponement after her withdrawal proposal was resoundingly voted down by the House of Commons a few days ago. However, May’s offer is subject to Parliament’s approval of her new deal which is expected to be tabled for the third time in the forthcoming week. She is facing a momentous task of turning around her own party’s massive dissent to the deal.

Even now, May faces the enormous task of reversing the opinion of 149 lawmakers who are vehemently opposed to her plan. In order to prevent further efforts by MPs from forcing another Brexit deal on her government, she must convince 75 MPs to switch their opinion.

The Prime Minister cautioned that a significant postponement of Brexit would be needed if MPs dismiss her plan for the third time which would compel the United Kingdom to participate in European Parliament elections in May and keep paying for the EU budget.

The lack of detail has frustrated the negotiators on the other side of the English Channel. Some EU leaders have expressed their uneasiness in granting May an extension or working out the deal again.

Emmanuel Macron, the French President, said yesterday that any postponement to Brexit could only be “a technical delay to allow more time to put their departure in place.”

Furthermore, Macron, who is presently in Kenya, stated that the UK should come up with a proper reason for the EU to consider an extension. He opined that the UK must ensure that “something will come out” of the delay.

The number of Americans submitting unemployment benefit applications in the US last week was higher than anticipated, signaling a slowdown of the labor market.

On a seasonally adjusted basis, initial claims increased by 6,000 to 229,000 (seasonally adjusted) for the week ended March 9th, the Labor Department said on Thursday. Data for the earlier week remained unchanged at 223,000.

Economists polled by Reuters had anticipated the claims to increase to 225,000 in the latest week. Since the beginning of 2019, the number of requests was hovering near the middle of the 200,000 to 253,000 range.

The Commerce Department also reported a 6.9% m-o-m decline in the sales of new US homes in January, indicating that buyers remained mostly inactive during the government shutdown.

On an annualized basis, the number of new homes sold were 607,000, down from 652,000 in December. Economists had anticipated a figure of 622,000.

On the housing market, Matthew Speakman, an economist analyst at the real estate company Zillow, said as follows: “The partial federal government shutdown and the harsh winter weather that affected much of the country both weighed on economic activity. But our bet is that buyers will prove resilient as winter turns to spring, and throw their hats into the ring with the benefits of falling mortgage rates, falling home prices and rising inventory.”

If the US economic data were stronger, the GBP/USD pair would have faced a steep decline. Still, the Brexit related uncertainty is expected to keep the GBP/USD pair weak in the short-term.

The historical price chart indicates that the GBP/USD pair is facing resistance at 1.3290. The currency pair is also moving along the declining channel. Additionally, the oscillator of moving average has a negative reading. As a result, we can anticipate the GBP/USD pair to remain bearish in the days ahead.

gbp - technical analysis - 15th March 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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