Brexit impact over, yields rising, currencies at both ends of risk spectrum fall - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, suggests that the Brexit fear is now close to being fully priced into the GBP, in his view and the most recent slide in October tends to reflect the hard Brexit risk. 

Key Quotes

“GBP is likely to remain weak for some time, but it may have seen its low in the flash crash last week.  Global bond yields continue their creep up despite dovish comments by the ECB and BoJ since Friday. We can see further rises in global yields unwinding from an extreme low that evolved on expectations of more QE, deeper negative rates, and extreme dis-inflationary expectation. 

The market has been distracted from the evidence of modest improvement in the global economy and a rising trend in commodity prices this year by Brexit, banking sector woes in Europe and Japan and more bearish long-term forecasts by the Fed since mid-year. Fiscal impetus has turned positive and inflation expectations are now firming, supported by higher commodity prices. 

As yields rise they will tend to reinforce an improvement in global economic confidence and unwind excessive pessimism on inflation.  Higher yields have negative implications for both ends of the risk spectrum, they will tend to weaken extreme low yielders (JPY, EUR, and gold) and also weaken the high yielders, like NZD.”