XTB | Jun 12, 2019 11:54
There’s been more upside seen in sterling this morning with the pound building on Tuesday’s appreciation and trading not far from a 3-week high against the US dollar.
While this short-term move is welcome, the longer-term direction of the pound remains heavily reliant on what happens next with Brexit and there remains a feeling that the market is underestimating the risk of a no-deal scenario.
Boris Johnson, the heavy favourite to become the next PM has promised to take Britain out of the EU with or without a deal on October 31st, and if he is as good as his word then the risk of a no-deal is rising. After MPs effectively blocked the threat of a no-deal a few months back the pound rallied as traders began to see Theresa May’s deal as the worst-case scenario. However, given the time restraints until the end of October, this outcome or a similar variation is now looking like the best possible outcome and as such could well provide a ceiling to any significant moves higher in the pound for the foreseeable future.
A leaked cabinet memo this morning has served as a timely reminder of the disruption that would ensue in a no-deal Brexit, with the document reaffirming the notion that the UK is still far from ready for this eventuality.
The note suggests that the government needs 6-8 months of engagement with the pharmaceutical industry to ensure stockpiles of medicines are in place and at least 4-5 months to mitigate disruption caused by border checks. Even if plans were put into place at this very moment it would be touch and go whether they would be sufficient to minimise disruption, and with these contingencies unlikely to being for at least a month there is a sense that time is getting away the best we can hope for is damage limitation.
After a relief rally last week that saw a strong bounce higher in the price of crude oil, the market is coming back under pressure with international benchmark Brent lower for the third day in a row and not too far from the 4-month low made last Wednesday.
The oil price is lower by more than 2% on the day following an unexpected build in last night’s API inventory data from the US which showed an increase of 4.9M barrels in the past week. This afternoon the more widely viewed government data will be released and if there is a similar size increase then we could well see a retest the recent lows and drop back below the $60 per barrel mark.
Written By: XTB
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.