After a brief recovery following the tumult over the summer months, the Pound is sliding once more over comments from United Kingdom Prime Minister Theresa May. Anxiety about the implications of a UK exit are now threatening the GBPUSD pair with a retest of the October multi-decade lows. With single market access now expected to be lost per comments from key officials, better economic fundamentals across the UK are unlikely be the driving force behind the Pound as attention shifts towards March.

Although hints about the UK’s negotiating position have been sparse at best over the last few months, the recent exodus of top EU Envoy from the UK Sir Ivan Rogers further complicated the outlook and raised suspicions that the UK has no clear position on what an exit means.While May has promised to clarify the UK’s positions on the matter, nothing new is expected to be forthcoming until a speech planned for later in the month, adding to the ongoing pressure on the Pound.

Financial Markets Pan May Commentary

The weekly reopening has been largely unkind to Sterling as concerns about the actual meaning of Brexit resurface. Even with plans to trigger Article 50 still months off, the Pound has slid in the absence of a clarified negotiating position and the increased prospect of the UK losing single market access.The significance of leaving the EU single market should not go underestimated considering the current mechanism allows for the free flow of goods and services across borders. However, the predominant reason cited is that the UK would prefer to retake sovereignty of its borders, even if it means losing access.

Now that single market access is at risk, companies, especially in the financial sector, are preparing to move components of their businesses from UK shores in an effort to retain access to the remaining European Union membership. The position is shared amongst many banking institutions, with HSBC building contingency plans to move 1,000 staff to existing offices in Paris and JP Morgan contemplating moving upwards of 4,000 employees. Other major UK banks are planning to open branches and subsidiaries in mainland Europe, with France and Spain also offering fast-track tools and services in English to UK companies in an effort to woo their business.

Sterling Reaction Sharply Negativity

In her first remarks of 2017, Prime Minister Theresa May emphasized that leave negotiations were all about, “getting the right relationship, not about keeping bits of membership.”In response, financial markets interpreted her comments as meaning that the UK is not married to the idea of retaining access to the EU single market, a blow for the many multinationals operating out of the UK and serving greater Europe. In a stinging rebuke of her comments, the Pound plunged over 100 pips against the US dollar since the weekly reopening, recovering only modestly after bouncing from support lying between 1.2113 and 1.2131.

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From a technical perspective, multiple indicators are lining up an increasingly bearish outlook for GBPUSD. After failing to overcome the 50-day moving average last week, this level is acting as the first level of resistance on the upside. Furthermore, with momentum indicators trending gradually lower, it suggests that there is further room for GBPUSD to fall before becoming overextended to the downside. Adding to the bearish bias is the completion of a head and shoulders bearish pattern. Although diagonal in form and not the standard horizontal pattern, it is indicative of growing downward breakout pressures. If support at 1.2113 is broken with a candlestick close below the level, it opens the door for a retest of 1.1650 over the coming weeks.

What Binary Options Investors Should Watch For

Looking ahead, investors should be keen to watch out for Theresa May’s upcoming speech as it will likely outline the UK’s negotiating platform and whether retaining single market access is a viable option. However, with the speech still weeks away, the interim will be dotted with fundamental data from the US and UK.

The major upcoming events that could shift the calculus are UK industrial and manufacturing figures due for release on Wednesday alongside a policy speech from Bank of England Governor Mark Carney on Thursday. US data will be sparser, with remarks on deck from key Fed officials and retail figures set for release on Friday. Nevertheless, with few factors looming as large as Brexit, GPBUSD is unlikely to be highly responsive to improving UK fundamentals.