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  • Writer's pictureMike Paterson

Brexit back in the headlines

Wednesday 15 May 2019

In the ever shifting battle to garner front page headlines it Brexit's turn as PM May announces she will bring her deal (however that lines up at the time) back to Parliament on 3 June. Given that it's likely to come on the back of appalling results for both Tories and Labour in the EU elections it would appear she's hoping the uncertainty will enable her to squeeze it through on the fear factor plus trading it off for her resignation.

Meanwhile the rest of the fragile global backdrop is still playing out with US-China trade talks,weak Chinese data and increasing tensions in the Middle East just three scenarios still in focus right now and risk-off sentiment continues.

GBPUSD has retreated further to test 1.2900 helped by GBPJPY and GBPCHF supply with EURGBP also underpinned again. Yesterday's UK jobs/wages data showed a mix of better jobs (headline at least) but worse than expected wages and the Pound was suitably unmoved.

EURGBP dip-buyers have been prevailing again on the GBP supply but finding sellers around 0.8685 again for the moment (GBPEUR support at 1.1515).GBPJPY remains on the back-foot on the risk-off sentiment/GBP supply but finding some decent dip demand for the moment on both this and core pairs.

I remain GBP bearish overall and continue to rally-sell as my preferred strategy and buy back in the dips amid all the global uncertainty/indecision including Brexit. In response to a client question here's a little more detail why:

1) Brexit uncertainty continues to spread increasing political turmoil with the govt in dire straits. May's deal def not good for UK imho and if her party want her to go and they see passing the deal as a trade-off then it does not serve the UK and hence GBP well imho. Yes, no Brexit at all might be perceived as GBP positive but the fallout from that certainly is not. Something else I've referred to in my updates many times too.

2) GBPJPY is a major trading pair for hedge funds as I've said many times from my ForexLive days and since, so the current global fragility I keep referring to continues to provide GBPJPY supply with ongoing JPY demand ( hence also my preference to be short USDJPY for a long time now) while inherent EUR dip demand naturally also holds up EURGBP in the dips and gives GBP supply too

3) Economic data might seem positive in certain areas but the deeper trends/smallprint I see as less so.

Others might argue against my stand point so it's definitely not just what the banks are telling me, it's more my own view of how price action is playing out, but I see no immediate reason to change my stance.

As for targets well that's subject to a variety of factors too from which the algos might cause some knee-jerk upside like we saw last Friday with GBPUSD up thru 1.3180, EURGBP down thru 0.8500 and GBPJPY up above 143.00 but look where we are now............ I don't have a crystal ball but can't rule out 1.25-1.26, 0.8780-0.8800 and 140.00 as being achievable but I'm not looking that far ahead.

Meanwhile EURUSD continues to find itself tightly bound amid all the EUR/cross activity and inherent Euro demand while USDJPY has traded tightly amid the USD and risk uncertainty but has failed into 109.80. Definitely a case of rinse and repeat still. USDCHF also remains on the back-foot amid the CHF demand with EURCHF also clinging to lows around the 1.1280 area I highlighted yesterday with the SNB watching closely still.

AUDUSD has also traded lower with weaker Chinese and Aussie data adding to the US-China trade concerns and has broken down through 0.6930 support as the Aussie$ remains under the cosh. USDCAD is STILL making its mind up and tightly bound amid CAD/JPY two-way business and now softer oil price again.

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

Have a good day out there one and all.

Interbank Rate 08.25

GBPUSD   1.2904

EURUSD   1.1206

EURGBP   0.8682

GBPEUR   1.1520

GBPAUD   1.8642

GBPCAD   1.7385

GBPZAR   18.3780

GBPHKD   10.0052

USDZAR   14.2308

USDJPY   109.56

EURJPY   122.76

EURHKD   8.6851

GBPJPY   141.38

AUDUSD   0.6922

EURCHF   1.1282

USDCAD   1.3472

USDCHF   1.0067

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