Why is sterling suddenly hitting 4-week highs against the US dollar, dragging euro to 3-week lows and even pushing up against the yen? Emerging opposition from the UK Labour Party seeking to have a smoother Brexit is helping the pound.
Labour is attempting to garner support from its own party as well as a number of Conservatives to its side to prevent government ministers from using the so-called Henry VIII clauses to change legislation without the usual parliamentary scrutiny. Labour is worried that the repeal bill (displacing EU laws with UK laws) would let ministers assume powers from Parliament to reduce people’s rights at work and protection for consumers and the environment. The repeal bill is the first of eight Brexit bills PM May aims to get enacted.
Over the past weeks, Labour has been shifting its position on Brexit, calling for continued participation in the EU customs union and single market during any transition period, following the scheduled end of Brexit negotiations on March 2019. The Party aims to create sufficient support to amend upcoming Brexit bills by MPs and in order to lay the course for a “softer” exit from the EU.
Markets will also be closely watching PM Theresa May’s next Brexit speech on September 21, which will help shape the next round of Brexit negotiations.
As long GBP traders continue to view chances of the UK remaining in a customs union and single market are positive for the currency, any obstacles standing the way of PM Theresa May attempts to speed up Brexit could help the currency.
Technically, GBPUSD appears to be in the process of breaching the neckline of an inverse Head-&-Shoulder formation, whose target could suggest $1.3200-1.3230.