With trade war tariffs escalating and causing USD volatility, many traders are probably looking for another major currency pair to trade. GBP remains consistent in its decline, but can we expect a bounce from Sterling soon, or will it continue to sink? Read on to see what will likely drive the upcoming GBP prices and whether you should Buy or Sell.
What’s driving GBP prices?
Most traders blame Brexit for the fall of GBP. Political discord often causes significant rallies and crashes, and traders performing fundamental analysis enjoy the predictability of a big scandal. So what’s coming for the UK—politically speaking—and how will it affect the GBP price?
If you are a GBP trader, now might be the time to strap in for yet another steep decline as the UK heads for a change in leadership. A new Prime Minister with different values and strategies might eventually recover some of the heavy losses to GBP’s international value, but that’s probably not going to happen soon.
British Prime Minister Theresa May has struggled to push her Brexit agenda since the first “no deal” announcement, and her support is further weakening to the point where her own party members are jumping ship at an alarming rate.
We are just a month away from the June 15 Tory meeting, when MPs will consider a vote of no-confidence in May’s leadership. A change in Downing Street will surely damage GBP even more, which suggests a Sell order might be the only option to offer potential profits in Q3. If Parliament passes a vote of no-confidence, it will trigger a general election that could push Brexit back even further and create more profitability for traders shorting GBP.
A second referendum
If anti-Brexit parties such as the Liberal Democrats, SNP, and the Green Party continue to gain support for the “People’s Vote,” a second referendum will almost certainly happen. While some see a second referendum as rejecting the result of the first Brexit vote, others see it as a step in the right direction for the UK—economically speaking.
Alternatively, if the Brexit Party, led by Nigel Farage, gains support, say goodbye to any hopes of a second referendum, and the UK’s EU exit will go ahead without further delays.
Trading Brexit this month
As we’ve seen over the last 12 months, the Brexit media releases have been very vanilla, offering little to no actionable news. Until a decisive announcement sets a clear path for the UK, traders will probably hold true to the current GBP downtrend, which has continued to decline since December 2018. Technical analysis for EURGBP shows a downtrend on every timeframe right now, and fundamental analysis offers nothing to suggest a bounce.
If Brexit goes ahead, GBP could fall even further. Many traders view the UK’s exit as economic suicide for the Brits, and their trades will reflect that viewpoint. If a second referendum wins the hearts and minds of the British public, expect positive sentiment to slowly leak into the foreign exchange market and create some attractive Buy action.
Have a trading account at the ready for the next Brexit announcement
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