The British pound has rallied to its highest point since July 2018 as fears of a no-deal Brexit have receded.
Prime Minister Theresa May has announced that MPs will vote on the withdrawal agreement on March 12th before voting on a no-deal and Article 50 extension on the 13th and 14th.
With the possibility of an extension to Article 50 now increasing, a softer approach on Brexit is becoming apparent.
Leading up to December’s low of $1.2482, the pound had been consistently falling due to uncertainty surrounding Brexit and the daunting possibility of a no-deal.
— Reuters Top News (@Reuters) February 28, 2019
However, there is now a newfound optimism in regards to the pound, which is being reflected in the options markets.
Risk premiums have not seen a notable rise, while 1 million risk reversals remain in negative (higher premiums for puts vs calls). Both of these indicators suggest that a no-deal Brexit will likely be avoided.
Technical analysis of GBP/USD
Since falling to a 20-month low against the dollar in December, GBP has made a 6.86% move to the upside, finally breaking out of the $1.323 level of resistance in the process.
The last week has seen the price of the pound against the dollar move above the 100 exponential moving average (EMA) on the weekly chart, with the 200 EMA coming in at around $1.3684.
On the daily chart, the 22 EMA has crossed over the 200 EMA, suggesting that a short-term rally may be in play.
Last July, the pound was rejected at this level, subsequently falling more than 5% in one month.
A delay to Brexit, which now seems likely, would be a boost to the optimistic sentiment regarding the pound at present as it would mean a no-deal at the end of March would be off the table.
It is likely that we may see a retest of the breakout level at $1.323, while a level to watch out for to the upside would be around $1.34711.
What does this mean for the cryptocurrency market?
Cryptocurrency was born out of the 2008 financial crisis. For the digital asset class to truly be adopted by the mainstream, many believe that another economic downturn or financial crash is needed for people to start seeing the importance in owning their own assets.
Currently, a run on the banks and withdrawal refusals seems far away. However, if the UK leaves Europe without a deal, analysts have been suggesting that the UK would enter another recession, with businesses feeling the squeeze of losing out on trade deals and a customs union.
Bitcoin remains the largest cryptocurrency at present, with a market cap of $130 billion. It led the way during the 2017 bull run, and has done the same on the way down during the latest 14-month bear market.
BTC has found a level of support in the region between $3,150 and $3,750 but has failed to break out during three previous attempts.
It would not be surprising to see BTC breach yearly lows and fall to as low as $1,800, which is a previous level of support, before cycling back around into a bull market.
Institutions have been keeping a keen eye on the cryptocurrency space over the past few months, with JP Morgan launching its own native token while the London Stock Exchange invested in the world’s first cryptocurrency bond.
Institutional adoption would not only add stability and liquidity to the digital asset markets, it would also legitimise Bitcoin and the underlying technology behind it.
This is why 2019 will be a key year for cryptocurrencies, especially if further turmoil is created in fiat markets with uncertainty surrounding Brexit and US-China trade deals.
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