For a couple of weeks, the British pound gained about 4% against the US dollar thanks to investors' belief that Boris Johnson would not be able to do the trick with the promiscuous Brexit. His idea of holding an early election was thrown into the trash by British lawmakers, and the Scottish court found the decision to dissolve parliament completely illegal. The verdict on the excess of powers by the prime minister should be made by the Supreme Court, along with the negotiations of Johnson and Michel Barnier in Luxembourg, and meeting of the Bank of England. Also, there is the release of inflation and retail sales data of the Foggy Albion that rightfully allows sterling to claim the role of the most interesting currency of the week by September 20.
The pound leads the race for the best G10 performers in the past month, and there is a special demand from the leaders. Large investors do not play long-term games with the British currency, realizing that its course is changing due to political news. In turn, this can turn everything upside down in a matter of seconds. Sterling volatility significantly exceeds similar indicators for currencies such as the euro and the yen, comparable to the monetary units of developing countries. It is not for nothing that the GBP is jokingly called the "Great British Peso." At the same time, the reduction in the risks of promiscuous Brexit forces speculators to gradually get rid of short positions.
Dynamics of GBP / USD pair and speculative positions on the pound
Despite the fact that parliament passed a law, forcing the prime minister to write a letter to the EU with a request to prolong the transition period after October 31, Johnson will not give up if a deal between London and Brussels is not concluded before this point. He stated that he would not write this and intends to protect the interests of the government through the courts. He stated that he would not write this and intends to protect the interests of the government through the courts. An ardent supporter of Brexit expects by his own eloquence to convince the European Union to make concessions at the summit in mid-October, but investors do not believe him. If Johnson compromises with the EU on the Irish border, he will lose the support of the Northern Ireland Democratic Unionist Party and will most likely lose the election. They are expected to be held in November or December. Curiously, the Times' announcement that the DUP is bent against the EU's Irish border demands catalyzed the GBP/USD rally. Although the party's leader, Arlene Foster, dismissed it later as absurd.
The improving political landscape allows the Bank of England to use hawkish rhetoric. He didn't refuse it even when Boris Johnson came to power in the government and the chances of promiscuous Brexit increased. Why not continue in the same vein? If inflation also accelerates and retail sales are positive, then the GBP/USD pair has every chance to continue the rally.
Technically, the bulls managed to gain a foothold above the upper limit of the short-term descending channel, which increases the risks of continuing the upward campaign of the pound to the target by 88.6% based on the Shark pattern. It is located near the 1.27 mark.
GBP / USD daily chart
