Cable dips under 1.31 as the pound slips on the day
GBP/USD touches a low of 1.3088
It's been a case of push and pull for the pound today as Brexit headlines are making it difficult to settle on a narrative. The earlier headline here produced an algo-led reaction for cable to move from 1.3115 to 1.3135 before settling back around 1.3120.
But as mentioned then, don't buy into such headlines as we've heard it all before. European officials have been fast to caution against such optimism and this wouldn't be the first time that has happened.
Right now, it feels like the pound has more to lose than it stands to gain over the next few days. The rally built up has been optimistic as negotiations are finally moving, but it's that final stretch is where things get tricky.
Theresa May has done well to get everyone to the negotiating table but the fact remains that she is still very much caught in the middle in the whole Brexit debacle. The EU is not going to budge on their stance with the backstop so the onus is still on her to try and get parliament to sign off on a deal that she can bring forward to the EU to be agreed upon.
And for now, that's not looking like it's going to happen any time soon. The bad thing about failure to get a workable deal by next week is that it only leaves the EU Summit in December as the only time all parties can sit down to work towards a deal. It leaves almost no room for error and certainly no room to go back and forth any more.
That for me is what the pound is going to trade on over the next few days. If there is no proposal to be had by next week or if May cannot convince European officials to give her more time to seek Cabinet ministers' approval, then all there's left is December and the stakes will be extremely high.
That sort of uncertainty isn't going to go well for the pound and that means we could be staring at the possibility that markets will be pricing in a potential no-deal Brexit outcome.
If the 100-hour MA (red line) in cable starts to give way, I would expect this to be a start of a sharp downturn in the pound especially when headlines continue to suggest that we are not going to get a November summit.