Happy Chinese New Year
Our New Year special promotion is available now.
Market News & Analysis
Bullish Brexit sentiment is not catching
Ken Odeluga December 5, 2018 11:10 PM
An outbreak of bullish sentiment in the UK was mostly limited to sterling and even the pounds gains were evaporating fast towards the close of UK trade.
Facing Wall Street
An outbreak of bullish sentiment in the UK is mostly limited to sterling as worrying signals from U.S. Treasurys keep global shares under pressure. British stocks, at least the top tier of the market, are more orientated to hints of recession from U.S. yields than to UK politics. At the same time, the pace at which sterling regained some tone is also keeping blue-chip buyers away.
Having maintained a firm bid from early in the European session, sterling buyers showed little inclination to ease up by the half way point, though caution returned eventually. The pound’s bounce—by as much as 128 pips against the dollar and 60 versus the euro—from close to 17-month lows hit on Tuesday owed almost all momentum to a reinterpretation of parliamentary events from a realpolitik perspective. The market now looks to be downplaying dark implications from a potential constitutional crisis. Instead, focus is increasingly on the possibility that an historic government contempt ruling, and a dizzying host of further developments could prevent Brexit happening at all.
True, the validity of mapping odds that Britain may not leave the EU, is as questionable as it would be for any uncertain event. JPMorgan now says chances have risen to 40% from 20%. Well, it’s less arguable that the odds have shortened, at least. Sterling remains deeply entrenched in ranges established a fortnight ago. But its biggest daily rise since 28th November points to increasing confidence in recent floors, even before highly likely tumult next week.
Still, as we head towards one of the most momentous weeks in UK politics for decades, it is worth maintaining perspective. Note sterling nowhere near made it to the top its roughly two-week range in the high $1.28s. Nor has it even matched Tuesday highs around $1.2840. Those were just short of corroborated resistance at $1.2850, near hourly peaks on 28th and 29th November. The shortfall reveals that enough healthy scepticism remains in the market. That underlying sentiment is backed by high demand for options covering the next trading week. Implied volatility – how wildly sterling could gyrate – has shot back to fresh 18-month highs for spot-week trades. In other words, as the real endgame looms, speculators continue to position for some of the biggest sterling surges of the year. Investors, who tend to use options to protect cash, aren’t taking any chances either. The pound could have further buoyant episodes before Tuesday, but the market hasn’t felt the last sharp whipsaw just yet.
Technical analysis chart: sterling/U.S. dollar and euro/sterling – hourly intervals: 05/12/2018 15:07:53
Source: Refinitiv/City Index
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.