GBP/USD remains modestly flat as Brexit optimism confronts UK-Iran tension
- EU readies for a soft Brexit despite Boris Johnson’s October 31 deadline.
- British ministers announce resignations if Mr. Johnson becomes the UK PM.
- Iran keeps the option of further political crisis open ahead of UK PM May’s Parliament meeting.
While optimism surrounding the Brexit helped the GBP/USD pair to start the week on a positive note, geopolitical tensions between the UK and Iran tamed the quote’s upside as it trades near 1.2500 ahead of the London open on Monday.
Diplomats from the EU and Ireland are holding private talks with the UK Prime Minister (PM) hopeful Boris Johnson’s allies to secure a good deal, comprising Irish border issues, if Mr. Johnson turns out as the British PM during the mid-week. It was also reported by the UK Times that the EU is preparing for a huge aid package for Ireland to bear the burden of no-deal Brexit.
The PM candidate Johnson seems less impressed by the bloc’s efforts and continues reiterating October 31 deadline while signaling options of the Irish backstop.
On the other hand, some of the key Tory members, including chancellor of the exchequers Phillip Hammond and Secretary of State for Justice and Lord Chancellor David Guake, stand ready to resign if Johnson becomes the PM, adding noise to the political pessimism at home.
Elsewhere, Iran is in no mood to release the second of the two oil ships seized claiming they were crossing its waters. The present UK PM Theresa May will head an emergency parliament meeting to resolve the issue while the PM candidate Jeremy Hunt, also the Foreign Secretary, reached to Germany and France for support.
At the US, receding chances of a 50 basis point rate cut might offer intermediate strength to the US Dollar (USD) amid lack of major data/events and positive trade-related headlines.
Although likely solution to the issues with Iran, due to support of the US, the EU and the United Nations (UN) to the British policymakers, can offer an intermediate help to the Cable, uncertainty surrounding Brexit can keep the prices in check.
Technical analysis
While 1.2440 and 1.2380 offer nearby support to the Cable, 21-day exponential moving average (EMA) level of 1.2520 acts as an immediate upside resistance for the pair to clear in order to aim for mid-month top surrounding 1.2580.