GBP/USD touches a low of 1.3021 on the session
Cable falls by about 40 pips on the headline here. The pound has been dragged to lows for the session but in my view, the move here speaks a lot more about market sentiment than it does about the headline itself.
It’s not the first time we’ve seen the DUP flaunt such words as they have been at odds with the EU on the backstop since forever now. And the comments by lawmaker Donaldson is not any different. But with sensitivity heightened this week, talks of a no-deal outcome will start to breed fear and fear breeds selling, which breeds more fear.
The real issue I see here is that it makes it more challenging for Theresa May to find a proposal to present to the EU by the end of the week. Not only does she need to convince her own Cabinet members later today, she also has to contend with satisfying her DUP counterparts on the backstop — in which they don’t see eye to eye with European officials, as evident by the headline above.
It feels like she’s being stretched too thin and markets will start to feel a little jittery on that. The pound has effectively erased all gains against the dollar today and cable now sits between the swing regions of 1.3000 and 1.3035.
The near-term bias is still more bullish as price sits above the two key hourly moving averages, but if price starts to threaten a move below 1.3000, expect the downside move to pick up traction rather quickly.
It’s all headlines now for the pound. Be safe out there.