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Another roller coaster time for the Pound as EU and UK agree new Brexit deal

Friday 18 October 2019

It's been another up and down and up 24 hours for the Pound as the Brexit shambles unveils further with the EU and UK agreeing another deal in principle but with the DUP and opposition parties casting doubts.More headlines a-plenty to come across the airwaves today, then tomorrow sees the special sitting of Parliament but GBP looks underpinned still for the moment with various outcomes still tending toward the bullish as far as the algos are concerned.


Tomorrow's special sitting of Parliament is key now and whether or not Johnson can garner enough support (320 votes needed) which seems unlikely atm but 24 hours is a long time in politics. We have to see whether the Benn Act resolution of requiring him to seek an extension if he fails is enforced. Juncker has said no further extensions but it's not just down to him.


In any case is an extension GBP positive ? Well that depends on where it all leads to. At the moment we have a soft Brexit which is GBP positive in theory as far as the algos are concerned. Will the EU even contemplate another deal anyway? Could we still leave with no deal? Will Brexit ever happen? No Brexit is GBP positive too but the political fall out from that is certainly not.


Talking of domestic politics we also have the scenarios of a no-confidence vote, a General Election, Second Referendum all potentially in the mix still, but not necessarily confirmed tomorrow. The picture is sadly further muddied by the Labour Party being unable to make its mind up on exactly what it wants, and perhaps too scared to call a General Election.


Whatever the outcome, expected from 13.30 GMT, and the general fall-out/headlines following over the week-end we can be assured of a gap in Pound pairs on the Asian opening so caution is still very much advised if you are thinking of running positions into the weekend. Not a play I would recommend, and certainly not in any great size, (there will be plenty enough opportunity following) and to that end we can reasonably expect some position squaring from both the interbank and retail markets before today is done.


I hope to be able to find time on Sunday to email you with a few thoughts to the Parliamentary outcome/s ahead of the Asian opening.


Yesterday's GBPUSD rally to 1.2990 was a good opportunity to sell again and should continue to be if we get back up there which we can't rule out given the current uncertainty/volatility. Similarly we've been back down to 1.2760 since and back up to 1.2910 this morning. I repeat that patience will always be a virtue when it comes to picking your execution levels.EURGBP has also enjoyed the return trip once again and presenting 2-way pips but found a base at 0.8575 (GBPEUR cap 1.1661) before rallying as quickly to test 0.8700 (1.1500). GBPJPY continues to see good two-way business with a strong rally on the Brexit deal announcement before failing at 141.50 and falling back to 138.66  but still underpinned and and now back above 140.00.


I will continue to rally-sell GBP as my preferred strategy overall but always happy to buy back in the dips still.Yes the current demand has to be respected as the madness plays out but I repeat that this could still have a number of outcomes and remains pure guesswork/conspiracy theory. Equal case for GBP longs still despite the sharp rally in the past week but risk reward fades the higher we go.


EURUSD is still underpinned helped by some risk-on EURJPY demand and inherent EURCHF support amid the EURGBP supply/demand ride and we've now cleared 1.1100 before failing at 1.1140. USDJPY still remains tightly bound  between 108.50-109.00 amid the variable USD and risk sentiment.USDCHF has continued its retreat to post 0.9865 but continues to find dip demand albeit tempered by EURUSD continuing to progress higher too with EURCHF steady.


AUDUSD found support from some better China trade deal vibes and AUDJPY demand cleared out the 0.6800 offers triggering stops and now posted fresh recent highs of 0.6843.USDCAD has finally fallen through 1.3180 to post fresh recent lows of 1.3131 helped by some CADJPY demand, softer USD and firmer oil prices.


Fickle Forex markets ever prevailing so be ready with your entry/exit levels and orders as always.


Don't forget I offer 1-2-1 mentoring if there's areas of trading this latest volatility, or how to make best use of the order boards and expiries that you might need some further help with.


Tonight the currently very soggy and manager-less Shrimpers of Southend travel to Tranmere and we'll keep hoping for a miracle. This week-end England's rugby union boys take on the Wallabies, Ireland v All Blacks and Wales v France in the WC Quarter-Finals. Bring it on!!


Have a good day/weekend out there one and all.


Interbank Rate 08.05 BST

GBPUSD   1.2865

EURGBP   0.8639

EURUSD   1.1117

GBPEUR   1.1572

GBPAUD   1.8840

GBPCAD   1.6905

GBPJPY   139.70

USDJPY   108.58

EURJPY   120.74

EURCHF   1.0991

AUDUSD   0.6828

USDCAD   1.3140

USDCHF   0.9886


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