Market News & Analysis


Top Story

GBP/USD: New Brexit Plan Brings Indecisive Pound Reaction

…But the US dollar’s sudden weakness may cause the cable to rise anyway.

The GBP/USD barely reacted to Boris Johnson when he delivered his new Brexit proposals earlier. Everything the UK Prime Minister said had already been reported in the media. He proposes to ditch Thresa May’s contentious “backstop” arrangement for the Irish border and intends to replace it with a regulatory border in the Irish Sea. This would effectively split Northern Ireland from the rest of the UK, as the former would stay in the European single market for goods but leave the customs union. A plan designed to fail and provide no serious proposals, said the opposition parties in the house. Under the new proposal, they argued, why can Northern Ireland stay in the single market and not Scotland? It seems very likely that the deal will be rejected by parliament as there isn’t enough support from hard-line Eurosceptics. So, the PM will be forced to seek an extension to Brexit, even though he has threatened to break the law and force a no-deal exit. Time is ticking. The uncertainty continues.

The GBP/USD’s price action is mirroring the political uncertainty hanging over the markets. Over the past four days (today included), the cable has displayed as many doji candles on the daily chart. These candles are formed when the opening and closing prices are roughly equal, with wicks in either direction – suggesting that neither the bulls nor the bears are in full control of price action. The current indecisiveness suggests a sizeable move is upon us once either the bulls or bears are defeated. Overall, I am leaning slightly towards the bullish side given the reaction of the US dollar this week. So, I would not be surprised if the cable were to rise from here and stage a short squeeze rally – despite the ongoing Brexit uncertainty.  


Source: eSignal and City Index.

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.