Johnson wins big but Cable cant hold 1.3500

Deal or no Deal?

Nikkei 2.55% Dax 1.25%

UST 10Y 1.89%

Oil $59/bbl

Gold $1471/oz

BTCUSD $7244

 

Europe and Asia:

Johnson wins big

 

North America:

USD Retail Sales 8:30

Boris Johnson swept to a historic victory in Parliament that assured him a working majority to implement Brexit. Cable soared by three big figures taking out the 1.3500 level but by US morning the pair gave some of the gains back trading below 1.3400.

Meanwhile in North America risk flows exploded yesterday after Trump administration said that it had an agreement in principle on a phase one trade deal with China. Yet the Chinese side has been silent.

In both cases, the euphoria may have gotten the better of markets for now as Mr. Johnson will now have to address the hard business of spinning out of the European Union while Mr. Trump will need to come up with actual details of his deal.

For Johnson, the challenge will be to take the UK out of the EU while preserving a customs union. Anything short of that will destroy the UK economy regardless of the wide-eyed optimism of the bulls. The UK is a services economy that produces very little in terms of products that anyone wants to buy. Its primary strength is in the creative and financial industries which will need full and unfettered access to the Continent in order to survive.

Despite Mr. Johnson's often buffoonish persona, we believe he is shrewd enough to realize that fact and now with a working majority in Parliament may be able to ignore the more extremist parts of his party in order to negotiate a workable deal with EU. Simply put that would involve throwing the DUP under the bus and abandoning the idea of a hard border in Northern Ireland and agreeing to a be bound by a host of EU regulations in order to ensure a free flow of goods from the Continent to keep the UK economy running.

Cable trade over the next few months will be driven by the pace and progress of the negotiations on that front which means that volatility in the pair is not finished.

In North America, the enthusiasm over the trade deal may be premature. So far the Chinese have confirmed nothing and wildly overstated figure of 50Billion agricultural buy which is bigger than the total US agricultural exports appear to be a verbal agreement rather than a hard written order.

The announcement yesterday appears to have been nothing more than a face-saving gesture to delay tariffs which would have been suicidal for US retailers ahead of the holiday rush. Still, the tariff delay may be all that the market wants to hear and will view any scarps of concessions by the Chinese as simply gravy. Global investors simply want to the war of attrition on trade to end and that could be enough to keep the risk rally going.

Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD moving one step closer to 1.1000

The shared currency remains under pressure amid dismal local data and persistent demand for the greenback in a risk-averse environment. EUR/USD trading near a daily low of 1.1009.

EUR/USD News

GBP/USD trims early gains, trades in the red

The GBP/USD pair has retreated from its daily high of 1.3105 and now trades marginally lower daily basis near 1.3050, amid dollar’s strength, looming BOE and Brexit.

GBP/USD News

Crypto market: FOMO mode on, the late-comer's doubt

The crypto market opens the trading week by taking advantage of the momentum of the movement that started early Sunday morning. As if it were an established rhythm, this week it is time to go up after going down the previous one, and up again the previous one.

Read more

WTI: Bears going to town with the coronavirus, fresh lows of $52.18 printed

Oil priced are under pressure, extending a drop from just below the $66 handle at the start of his year to fresh lows at $52.18.

Oil News

USD/JPY: Bears lead on the run to safety

Coronavirus getting stronger, infections to continue to rise. Risk-off Monday, an empty macroeconomic calendar exacerbates sentiment trading. USD/JPY to accelerate its decline on a break below 108.65, a critical Fibonacci support level.

USD/JPY News

Forex Majors

Cryptocurrencies

Signatures