Market News & Analysis

Top Story

Daily Brexit update: Why sterling isn’t falling off a cliff

Daily Brexit update: Why sterling isn’t falling off a cliff

Despite an increasingly likely defeat of the Brexit Bill next week, sterling looks resilient. Traded against the dollar, the pound is rounding off the North American session down 40 odd pips, but that’s still fully 2.4% higher since lows on 2nd January. Sterling got going against the euro a bit slower last week but had advanced as much as 143 pips above 4th January’s low by the middle of Europe’s session before softening again. Even as a terrible week in British retail unfolds, sterling isn’t exactly falling off a cliff. Shares in multiple high-profile firms saw double-digit percentage losses on Thursday alone as consumers grow more cautious, partly on Brexit uncertainty. At the same time, the opposition Labour Party is pushing harder for a general election if Parliament votes against Theresa May’s Brexit deal. Labour leader Jeremy Corbyn is also increasing calls for a fresh referendum, but the risk that a he could lead the next government is generally regarded as a negative for sterling, given nationalisation policies and others that could deepen the budget deficit. In short, sterling is proving remarkably robust for now and this shows in the highly sensitive options market. Earlier this week, premiums for expiries under one month projected the lowest risk of sharp moves against the dollar in six months.

The key to the market’s growing ease appears to be signs that Parliament is taking a tougher line. That was most obviously expressed this week by votes that sharply weaken Downing Street’s power to push through a no-deal Brexit. The next five days still promise to be some of the most unpredictable seen in British politics for years. But chances that the market’s worst fears will be realised are clearly declining.


Disclaimer

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.

Important Notice:

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.