Sterlings very British constitutional crisis

As ‘constitutional crises’ go, it’s a fairly relaxed one, in sterling.

Sterling has kept most of a 130-pip rapid recovery that came almost  immediately after government plans for a third ‘meaningful vote’ were blocked. Relatively relaxed ambience—in higher volumes, according to FX specialist CLS—means there’s been no discernible retreat in expectations of market-friendly outcomes. Data confirming Britain’s jobs market remains robust has helped. But sterling/dollar’s flash look at $1.33 earlier was the giveaway.

Multiple reports now project EU discussions around an offer to the UK, but probably next week; after the summit on 21^st-22^nd March, in view of heightened British political flux.

The sense that the EU27 is unlikely to refuse an extension, has prevailed. But so too have demands for clarity on how an extension would be used. The sub-text is that approval may be contingent on a delay longer than a few months. Yet Downing Street, which is preparing a request, is said to be “pushing back hard” on anything longer than two years.

Unsurprisingly, sterling is locked into a pattern of soft-volatility range trading. As markets inch into position for an update of U.S. monetary policy, trade against the euro provides a clearer view. As in Brexit, a denouement is coming, though a less far-reaching one.

• The rate is coiling in a wedge for a possible breakout which looks imminent
• The 100-hour moving average is in slight decline, adding a negative bias (sterling-positive)
• The focus is consequently lower: chiefly the 85p region, the base of several hourly lows over the last week
• Aggressively spiked 0.8472, if seen soon, should return the initiative to euro buyers, again