Brexit Resolution Creates Uncertainty for British Pound

05/20/2019 1:02 pm EST

Focus: FOREX

Ashraf Laidi

Founder, Intermarket Strategy Ltd. and www.ashraflaidi.com

The British pound is waiting on Brexit withdrawal agreement, notes Ashraf Laidi.

You know the market is admittedly clueless about the British pound sterling's direction when the experts themselves are saying: "it could go up 1% or down 1% down" or, to hear an answer worded in the following manner: “If the Withdrawal Agreement is accepted…., then we will see ….and if it is rejected, then….”

I highlighted in last week's chart that implied option volatility on GBPUSD appears excessively suppressed, considering the sharp descent in spot GBPUSD. Those who are bearish GBP will tell you the market is being complacent and volatility is underpricing the risk of heightened political uncertainty (Prime Minister May having to leave and allowing a leadership vacuum behind her).

Those who are bullish or neutral GBP will explain the relatively low volatility by either indicating that it's too early, referring to the vote in two weeks' time.  Others would state that a smooth Brexit is inevitable.

So what do we think? Will Theresa May wait for the outcome of Thursday's European elections to map her strategy for the Withdrawal Agreement vote?

Ashraf Laidi recently talked about the Dollar, gold and the Chinese yuan Triangularity at TradersEXPO New York.

Our record in the Premium Insights for the GBPUSD has been improving, with 11 out of 19 trades closed at a profit over the last two years (since May 2017). You can see his daily analysis at www.AshrafLaidi.com.

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