ANZ Forecast GBP/USD in 1.28-1.30 Range

GBP/USD could rally  towards 1.30 if the Supreme Court backs the High Court’s decision to give parliament the final say on Brexit argue analysts at ANZ.

The GBP/USD pair is likely to encounter some volatility this evening when the American people come to choose their next leader.

The choice likely to cause the most movement is a Trump win, with the reaction to a Clinton victory much more muted.

As such, analysts at ANZ see the GBP/USD pair mainly dominated by Brexit politics.

The recent decision by the high courts to force the government to put Brexit to a parliamentary vote was a major source of strength for the Pound, and helped it push up to the 1.25s.

More upside, however, will require the Supreme Court to back the High Court’s decision.

“A recovery towards a 1.28-1.30 range is feasible, and possibly more likely if the Supreme Court upholds the High Court’s decision," say ANZ in a research note.

The 1.28-1.30 level is not an arbitrary level, emphasize ANZ, but corresponds to the exchange rate before fears of a ‘hard Brexit’ generated by rhetoric at the Conservative Party conference, sent the Pound to its flash crash lows.

“Sterling’s most recent slide started in early October as the Conservative Party conference got underway. Sterling was trading just below 1.30 vs USD back then, so a recovery towards a 1.28-1.30 range is feasible,” said the report.

ANZ now see the possibility of a softer Brexit resulting from parliament’s influence.

“Should the Supreme Court uphold the High Court’s decision, the government would have to bring in a new law, voted on in Parliament, to leave the EU.

“That could be subject to much debate over what Brexit will look like in both the House of Commons and House of Lords and it could delay PM Theresa May’s plan to trigger Article 50 before the end of March 2017,” said ANZ.

Such a possibility is likely to keep the pound well bid in the foreseeable future, whilst the flash crash lows seem to put a floor on its decline, as they represent the worst case scenario of a Hard Brexit.