Chicken is the name of the game
For those readers unfamiliar with the phrase 'playing chicken' the expression means to continue on a collision course until you (or your opponent) moves out of the way.
I remember around the year 2000 when I was volunteering in East Africa over my student summer holidays. I was travelling by coach to Mombasa overnight from Nairobi. The journey was memorable as the drivers continually played chicken with each other. The road was only wide enough at the time for one vehicle, so when you faced an oncoming vehicle you would flash your headlights at them until they moved off the road. It wasn't a comfortable journey given how close to death we seemed to be on a regular, and somewhat casual, basis. Not recommended. (The train from Mombasa to Nairobi was more comfortable and, aside from it rolling backwards in the middle of the night, no indication of any chicken games going on!)
So, Theresa May now finds herself in a similar situation, except that she has 27 member states bearing down on her. All of whom, incidentally, are sticking to their guns. Bother. So,Theresa May drives on hoping that the potential car crash (for the EU and Britain) will be enough to clarify and consolidate political will to get a deal done. I still maintain that some kind of sunset clause is the best way around this and feel the deal will be done. However, it now comes down to May's ability to play hard ball against the EU 27 member states. The GBP/USD has been currently fluctuating between a no-deal being priced out with the extra tailwind yesterday of a more dovish Fed and end of month USD selling.
One thing that the last few political votes with the GBP has shown me is that volatility has been limited, at least in terms of GBPUSD moves. I am interested in the 1.3000 R2 and R1 regions for potential longs on the daily chart, but playing it day by day. (see circled regions on the chart above) However, I feel the risk is to the upside here, as a deal being struck would cause a decent rally in the GBP.
