GBP/USD pares earlier gains and moves back to unchanged levels today
The pound is failing to see much upside as May offers to delay Brexit until 30 June in a letter to European Council president, Donald Tusk, this morning. Cable rose earlier in the day to a high of 1.3123 after Tusk was reported to offer a year-long extension but price ran into resistance from the 100 and 200-hour MAs, where it got rejected.
That indicates that sellers are still in near-term control of the pair as price failed to break above the key resistance levels and have now moved back below the 1.3100 handle.
The issue with May requesting a 30 June extension is that it really is neither here nor there. If the UK fails to ratify a Brexit deal before 23 May, then they would have to participate in the European Parliament elections - which means that Brexit can be extended well beyond that if need be.
It is a move that is politically motivated because of the position she is in but it doesn't help the UK all too much should the EU only allow for an extension up until next year instead. What that means is that May has to go back to parliament to discuss if that option is viable - since parliament will not accept a no-deal on 12 April - but if time runs out before they can implement the extension, the UK risks invoking an 'accidental no-deal Brexit'.
That is something to consider in the calculations for the time being. Looking at how things are going, the EU seems to be leaning towards either offering a long extension or no extension at all. This makes May's 30 June request seem a bit redundant but I guess she doesn't have the cards to play for a longer request.
Whatever the case is, I reckon there could be more twists and turns along the way over the weekend. But for now, the immediate focus for cable will be the US jobs report later. Let's take things one step at a time, shall we?
