Market News & Analysis


Top Story

Pound bought for a date in December

Boris Johnson loses yet another vote for an election, though the Lib-Dems and SNP have blinked, so sterling stays firm

Does the EU’s confirmation of a three-month ‘flextension’ improve Boris Johnson’s chances of eventually gaining the two-thirds Parliamentary majority he needs to call an election? As far as we can tell, not much. As shown by the failure of the prime minister’s latest attempt on Monday night, the mathematics remain dicey.

Rather unsurprisingly, Labour earlier signalled that its support remains conditional on the complete removal of hard-Brexit risk, even now that the chances of Britain crashing out without a deal – this year, at least - have become almost non-existent.

Without Labour support, a separate scheme, backed by the smaller Lib-Dem and Scottish National Party opposition parties to force an election on 9th December (three days before Prime Minister Johnson’s preferred date) may fail to win a majority as well.

However, the pound has seen a late European-session fillip linked to the Lib Dems stating that they would back a government move for an election on Monday 9th December. So far, the government is sticking with 12th December. However, the government confirmed after losing Monday’s vote that it would introduce a ‘short bill’, perhaps as early as Tuesday, regarding a general election. A bill would only require a simple majority, rather than a 2/3 majority. Lib-Dem/SNP support may hinge on the proposed date being brought forward by three days.

In practice, the precise date may just as likely prove to be a red herring. After all, there is far more evidence of Lib-Dem and SNP co-operation with Labour than with the Tories. On the other hand, those extra three days are expected to make the difference between Parliament returning from a general election this year and coming back in 2020. In case of the latter, as time runs out, accidental hard-Brexit risks could rise. Additionally, with the Lib-Dems and SNP being the only ‘official’ remain-supporting parties, and the Commons conditionally supporting Johnson’s deal, an early election may look like a last chance to bring Brexit to a halt.

As such, markets continue to read election prospects as high, enabling sterling to maintain an elevation near 5-month peaks. The chance of diminished uncertainties still seems to be trumping risks that an election could have consequences that may be deemed market unfriendly.

Chart points

  • The pound is in the process of confirming the break out from last week’s wedge/flag on the bullish side
  • GBP/USD has clawed its way above intermediate ~$1.284/~1.2865 resistance. It needs to hold above there to validate the continuation pattern
  • If the rate can establish itself topside, classically, the measured length of last week’s consolidation could equate to initial gains; in other words GBP/USD could recoup the 2½ odd handles back to the $1.30 top and possibly beyond
  • Conclusive failure should shift focus back to $1.2750 support, to begin with
  • The RSI momentum gauge is inching higher, though is inconclusive in the daily view;  keeping an element of appropriate uncertainty

GBP/USD – Daily [28-10-2019, 19.30 GMT]

Source: 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.