Market News & Insights
25 June 2018

2-years On And We Seem More Unsure Than Ever

Saturday 23rd June 2018 saw the 2-year anniversary of 2016’s historic Brexit referendum result which initiated the process of Great Britain’s eventual withdrawal from the European Union. Doomsday was predicted but luckily I’m still here typing. Leave campaigners promised prosperity but we seem to have only seen the downside risk with no upside gains. 2-years on and as one of the most documented events on the global stage we are all quite attuned to what’s been going on and I would need at least 5 pages to give an concise overview. So opposed to further predictions of doomsday and promises of a UK that resembles America’s ‘Great Again’ campaign, let’s stick to the facts. GBPUSD still remains at historically low levels whilst GBPEUR tight trading range shows that markets remain cautious over the eventual outcome. The one thing that has benefited sterling the most post-Brexit is the performance of the global economy. A sign of this; the FTSE 100 might have opened negatively today but has also hit record highs in 2018. The reason? 70% of the FTSE 100 revenues are generated overseas. A weak sterling opposed to an extremely strong dollar has fuelled this charge. The true driver in sterling gaining true momentum in the global currency markets rely on two main indicators; The UK’s Economic performance gaining some consistency which could inevitably back a rate hike. The second is some form of clarity on negotiation, at this stage good or bad.

Reports over the weekend show that business sentiment in the UK is dropping significantly, with business owners making a joint assault on the UK government for the needs in some understanding of the eventual outcome of Brexit. 5 of the UK’s main business lobbies have stated that they would like a say in negotiations, and on the back of Airbus’ threat to remove 14,000 jobs from the UK should doubt continue, business sentiment needs a significant boost. The immediate impact has been limited. Having lost the majority of its gains following last week’s MPC Rate Decision GBPEUR is trading slightly above open with a range of 1.1340 – 1.1387. GBPUSD has also remained quiet on open with a range of 1.3220 – 1.3270.

Across Europe now & the EU’s position has remained little unchanged from last week’s reports that EU leaders are preparing for a ‘No Deal’ outcome. Main headlines surround the ongoing immigration negotiations with German leader Angela Merkel’s hopes of establishing a generalised EU approach to immigration ahead of this week’s full summit took a significant blow on Sunday afternoon as the sixteen EU leaders which attended emergency talks in Brussel’s failed to reach an agreement. EUR seems yet to digest the political impact this stages. The failure to achieve a general agreement means that Merkel will have to pursue individual agreements with EU leaders, only adding fear that her government could be on its last legs.

Across the pond and US President Donald Trump has added further tension to trade fears after reports suggested that Trump’s plans to bar ‘many’ Chinese companies from investing in US Tech firms while blocking additional tech exports to Beijing. The implications to Trump’s negotiation styles has been summarised in an internal EU Memo, which states ‘Trump’s aggressive approach to recasting US partnerships and his direct assault on the World Trade Organisation will unwind decades of progress and return global commerce to a free-for-all’. Amidst the news EURUSD has also opened cautiously with a range of 1.1628 – 1.1674.

Data Releases this Week (BST):

UK:
BOE Governor Carney Speaks, Wed 27th 09:30am
Current Account, Fri 29th 09:30am

US:
CB Consumer Confidence, Tue 26th 3:00pmCrude Oil Inventories, Wed 27th 3:30pm
Final GDP q/q, Thu 28th 1:30pm

EU:
EU Economic Summit, Thu 28th, Day 1
EU Economic Summit, Thu 28th, Day 2

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