Little support seen in cable as the fall under 1.30 continues
The bill has caused a major ruckus among EU and UK lawmakers over the past week, and in turn has sent the pound into a tailspin as the decline continues today.
Cable is down 0.4% to a low of 1.2919 on a break below 1.3000 yesterday, with little in the way of sellers hunting for a move towards the 50.0 retracement level @ 1.2867.
The internal market bill is set to detail the UK government's plans for policing trade between different parts of the country and the issue of Northern Ireland is the major stumbling block as the EU insists that the bill "will break international laws".
The bill is said to underline that UK ministers have extra powers to ensure the application of customs and trade rules in Northern Ireland - which is supposed to stay part of the EU's single market under the Brexit withdrawal agreement.
Meanwhile, the UK insists that the bill will not override the withdrawal agreement but merely make "minor clarifications in extremely specific areas".
I think with the ruckus that is being caused and the resignation of Sir Jonathan Jones yesterday, it is clear that there is more than meets the eye with this.
And if anything else, it looks very much that the UK is attempting to walk back on parts of the withdrawal agreement - in some convoluted way at least.
As for the impact on the pound, this just continues to push both sides closer to the brink of a no-deal Brexit but again, one has to wonder how much of a bluff this is all going to be at the end of the day.
We have faced this same kind of pressure on numerous occasions now but at the end of the day, there is always some wiggle room to at least work towards a compromise.
The break under 1.3000 is no doubt an ominous signal and the mood surrounding negotiations this week will also be an important factor dictating pound sentiment.
I reckon, both sides will still clash heavily and there might be little reprieve for the currency in general. For cable, buyers need to push back above 1.3000 in order to try and wrestle back any form of control.
Otherwise, the path of least resistance remains for it to be lower. But amid some rough interpretation surrounding the internal market bill, there might be scope for some upside if the market sees it as less of a stumbling block than it actually is.
That said, I still reckon the pound remains a sell on rallies for the most part considering the way that broader negotiations are developing as we move towards October.