The tone of the speech suggested by the splash in the Sunday papers and the sudden drop in the pound yesterday did not suggest that we would then see the strongest gain for the currency versus the USD since October 2008. Yet that is exactly what we have seen. The major development from today is that Parliament will get full oversight of a deal and a chance to vote on it as well. In addition, the PM struck a conciliatory tone that will have calmed many who feared that the UK was about to embark on an acrimonious divorce; whether that tone is matched by the EU remains to be seen, and the PM was careful to stress that the UK would not roll over and surrender meekly in any negotiation.
Currency movements seem to be the driving force behind markets now, seemingly more than ever, and this is why we have seen the FTSE’s losses increase even as the pound rallies. This is partially a dollar strength story on the back of Trump’s comments about the dollar being too strong, plus those robust UK CPI figures, but the signs that the UK is looking for a ‘meaningful relationship’ with Europe that preserves (as much as possible) what has been achieved over 40 years of membership should mean that more gains are on the way. Against the euro there looks to be further strength as well, with EURGBP turning lower. It is entirely plausible to argue that the pound’s declines have ceased for
now, particularly if the wage figures tomorrow (released along with the unemployment report) are better than expected.
With the speech out of the way, and the Article 50 deadline still a few weeks off, it is likely that Brexit will drop off the radar for the time being. Instead, US earnings season and the new administration will take precedence. We can expect Brexit to rumble along in the background for a while now, and come back to the fore in March for a time. The PM seems to have achieved her goal of setting out a plan without giving too much away, and markets, for now, appear happy to give her their backing.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Recommended Content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.