Brexit final steps in relation to the GBP.

What happened

The legislation for Brexit, as previously approved by the House of Commons, is now confirmed by the House of Lords. On Wednesday, the upper chamber of the British Parliament granted its approval for the document, passing it to the very final stage. Now, the paper only needs the signature of Queen Elizabeth II to be formally considered as official law.

What next

January 29 will be when the European Parliament will need to ratify the Brexit document. Once it is done, January 31 will be the date when the UK will be formally no longer a part of the EU. After that day, a transition period will start. It will last until the end of 2020. During this period, the UK, still following the EU laws, will be negotiating the terms of its economic cooperation with the members of the European Union.

What does it mean

Brexit is finally done. Done and done. That should be a bit reassuring for the UK economy, the GBP and the British society in general, whatever difficulties come next. The very fact that the years of uncertainty in this particular sphere of life for Great Britain, and the EU, come to an end, is a supporting factor. For the British pound, that should bring a fortifying effect, or at least give it some rest before it goes into another period of turbulence as the hard part of Brexit negotiations takes off.

Where do I see it

Against the Euro, the pound gained strength to the level where it was in the first part of December. It is possible that EUR/GBP goes below the support of 0.8430 to touch the December resistance level of 0.8400. But any further decline of the price in favor of the British pound will need strong input of the fundamentals from the Brexit-EU negotiations.

In the meantime, of course, the European economic factors do bring their part of the effect on the currency pair as well, so we have to take them into account. Particularly, we need to watch the monetary policy statement and press conference by the ECB today and see what Christine Lagarde has to say, specifically about the quantitative easing measures by the bank.

In other words, let’s wait for January 31 to let the UK break free from the formal bonds with the EU, and see how the negotiations start. Stay updated and watch EUR/GBP!

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