The Brexit situation continues to confound. Importantly on this, we have yet to agree on any major hurdles with the EU, on Britain’s withdrawal. But to illustrate perfectly the complexity of the situation, it seems that the incumbent government can’t even agree on a unified way forward. 

The culminations of last weekend’s Chequers meeting – we no longer have David Davis as Brexit secretary following his resignation early this morning. Just recently, Boris Johnson also resigned. The trade on the back of this is confused and relatively more difficult than I had envisaged: I had expected there to be a notably weaker GBP today, but to prove me entirely wrong, GBPUSD has been trading higher to 1.3320. Even after Boris Johnson’s resignation, it is still trading up on the day at 1.3274, after trading in the low 1.32 range on Friday. 

As I analyse the results, it is becoming clearer that the market is pricing in either a soft Brexit or no Brexit at all.  How can this happen?  UK Prime Minister Theresa May’s position, in my opinion, is becoming increasing untenable – the Tory party seems bitterly divided and I see either a vote of no confidence or her quitting out right herself. Both could lead to another General Election. 

The result of this could either see another referendum to the UK public on whether to leave the EU or if Jeremy Corbyn’s Labour party gains power, a likely extremely soft Brexit. Technically, if Brexit doesn’t happen, we could see GBPUSD at 1.54. However, it won’t happen in a straight line and with 2 resignations as large as this, I expect increased volatility surrounding all GBP FX pairs in the very short term.

Chief Trader,

Jordan Hiscott


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