The fail of Theresa May to secure the votes for her Brexit deal has caused an increase of volatility, which caused a short lived drop of the GBP/USD. However, the rate returned to where it was previously, as the vote results were no surprise for the financial markets.
Namely, the volatility was caused because of short term speculators selling on the news.
The British Pound depreciated against the US Dollar, following the UK CPI data released on Wednesday at 09:30 GMT. The GBP/USD exchange currency rate lost 6 pips or 0.05% during a minute, right after the release. The British Pound continued trading at the 1.2870 area against the US Dollar.
The Office for National Statistics released UK CPI data that came in line with expectations of 2.1%.
The head of inflation at the ONS, Mike Hardie, said: "Inflation eased mainly due to a big fall in petrol, with oil prices tumbling in recent months."
"Air fares also helped push down the rate, with seasonal prices rising less than they did last year. These were partially offset by small rises in hotel prices and mobile phone charges."
"House price growth was little changed in the year to November, with buoyant growth across much of the UK held back by London and the South East."
Brexit turmoil continues
On Wednesday, fundamental events continued in full force. The UK Parliament was set to vote in a confidence vote, which would remove Theresa May from her post.Meanwhile, macro release traders were looking forward to the weekly US Energy Information Administration Crude Oil Inventories at 15:30 GMT. The event causes larger than one percent moves in oil prices each week.
Besides a speech at the G20 Meetings by Bank of Japan's Governor Kuroda at 03:20 GMT, there is nothing on Thursday to watch.
On Friday, two data releases will be covered by Dukascopy Analytics.
At 09:30 GMT the UK Retail Sales will be published. Around 10-40 base point move can be expected during the event.
The biggest event of the will occur at 13:30. The Canadian CPI will be published. On the USD/CAD there are 30 pip moves even when it hits the forecast. When the data is different there have been 40-85 pip moves.
GBP/USD short term review
During Tuesday's trading session, the UK Parliament voted to reject the passage of the deal. The vote results caused high volatility of 220 pips or 1.73% to push the rate to the 1.2670 mark. On Wednesday morning, the currency exchange rate was trading at the previously drawn pattern at 1.2867.In regards to the near-term future, most likely, the British Pound will continue to surge towards the upper boundary of the descending dominant pattern line at 1.2911.
However, the British Pound could be depreciated against the US Dollar during today's UK CPI data release at 9:30 which might push the rate to the 1.2805 mark.
Hourly Chart
The resistance cluster, which the rate faced previously, was standing on Wednesday. Namely, two pivot points and the 100-day SMA were located close above the 1.2900 level.
Meanwhile, note that the volatility of the Brexit vote ignored the support technical levels, as it was stated before. However, note that the situation in general has not changed and the resistance will continue to hold.
Daily chart
Note that the sentiment had not changed during the Brexit vote.
Meanwhile, trader set up pending orders in the 100-base point range were set to sell the pair in 60% of cases.
Traders were neutral on Wednesday, but still prepared to take advantage of another sudden drop down.