Sterling Dazed But Unfazed By Cox’s Bombshell
City Index | Mar 12, 2019 15:47
Tuesday brings another reminder to traders that Brexit complacency is inadvisable.
Short-term sterling implied volatility has surged to end-January highs, massively destabilising the spot. And the pound’s volatile day will continue. Tonight’s vote is set to go ahead as planned.
Perhaps the “legally-binding” aspect of Brussels’ new undertakings lulled some participants into a feeling of greater security despite past experience. In the event, the long-awaited opinion from Britain’s most powerful politician—on Monday—Attorney General Geoffrey Cox—was a bombshell. The backstop provides "no internationally lawful means of exiting".
h2 Worth noting:/h2- Options data show far lower expectation of wild swings beyond the one-month mark. This means the market remains fairly relaxed on Brexit prospects in coming months; strongly backing the notion of a delayed Brexit; somehow, when the miasma of uncertainty thins
- Verbal comments from Cox in the Commons drew further poison from his written opinion, lifting sterling off lows. For instance: “Ultimately the UK has a good right to withdraw from any treaty as a sovereign state”
But expect trading to be more circumspect into the 7.00pm GMT vote on the government’s Brexit deal. Even at its ebullient best, cable again respected 20th September’s $1.32982 high as resistance. Tuesday’s top is $1.3264, below Monday’s. Still, a wide up-channel confirmed in December is intact; more implied support. Monday’s $1.2960s lows are also untested so far. Note $1.2968 on 22nd Feb too. If all these go, mayhem of greater intensity may lie below.
h3 /h3 h3 Price chart: GBP/USD – hourly [12/03/2019 14:31:05]/h3Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
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