The Brexit, The Pound, And Your Trading

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The Brexit, The Pound, And Your Trading

Brexit Looms, Fears Increase, BOE In The Wings

In light of recent events I feel it is timely for me to review the pound and pound-based trading pairs. The EU and UK negotiators announced a new Brexit deal just a day or two ago and in that time a serious rally in the pound hit a wall. On the one hand positive developments regarding the deal and a successful renegotiation have strengthened the pound. On the other, opposition in Parliament and a “buy the news sell the reality” mentality is setting in. Yes, a smooth Brexit will be good the UK economy and the pound but no, it is not likely to make a material difference in the UK’s economic outlook. Status quo will be maintained.

The status quo at this time is shaky economic fundamentals, slowing global growth, and expectation for central bank stimulus. The BOE is among those expected to cut rates, add stimulus, or at least come out in favor of economic support. The bad news for the BOE is that their next policy meeting is not until after the 10/31 Brexit Deadline and it is a 100% certainty the outcome of that event will sway their decision. Before that however, is the ECB meeting.

The ECB is slated to meet next week and also bears a high expectation to produce stimulus. The EUR/GBP has been in a downtrend the past few weeks and may go lower … if the ECB exceeds the markets expectations. The problem with the chart is that the new low is divergent from MACD and stochastic which is a signal I do not like to ignore. This divergence suggests there will be at least a rebound/retest of resistance that could take the pair up to the 0.88385 level. Add to this a bullish crossover in the stochastic and the odds of rebound over the next week increase. If the ECB fails to meet expectations I would expect a more substantial rally in this pair.

The GBP/USD chart is a near mirror-image of the EUR/GBD with one major difference. The MACD peak is convergent with the new high which suggests this rally may have legs. The FOMC is also expected to cut rates and that is what’s driving the move, the uncertainty stems from how much and when the committee will do so. It may be at the next meeting which is scheduled for 10/30, the day before the expected Brexit. A retest of 1.3000 is very possible, if not likely. A move above 1.3000 would be bullish and may take the pair up to 1.3600.

Brexit

On 31 January 2020, the United Kingdom left the European Union and began an 11-month transition period to unwind its 47-year neighbourly relationship. Stay up to date with eToro and trade your way through the transition.

Read the latest information on Brexit and learn how certain events and outcomes could affect your trading before it happens.

What’s happened?

In June 2020, the UK went to the polls to vote on whether to remain part of the European Union, deciding 52/48 to quit the world’s largest trading bloc.

After almost four years of tense negotiations – and three UK Prime Ministers – the two sides settled on a withdrawal agreement that avoided, for the moment at least, a “no-deal” scenario. This scenario would have seen all existing arrangements on goods, services and free movement of people, along with regional cooperation arrangements on security, medicine and many others, immediately halted.

Negotiators and politicians now have until December 31 to create, refine and agree a trade deal, or the “no deal” scenario will kick in again. Current PM Boris Johnson has ruled out an extension to the transition period, so the pressure is still on.

Transition trading topics

Over the next few months, companies from around the globe will be assessing their options in Europe and, without knowing any details of a trade deal with its former partner, how the UK can be factored in or focused on.

Equally as importantly, given that the UK’s current international trade deals have been arranged through the EU, global partners will be lining up to negotiate new arrangements.

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While World Trade Organisation terms would automatically apply in the event of a “no-deal”, they are seen as just a starting point for most trading nations, who seek specific agreements on tariffs, quotas and movement of people.

Opportunity knocks.

In the coming months (and beyond) there are likely to be plenty of rollercoaster moments as share prices rise and fall on Brexit-related news. Some will be confined to single stock movements, while others may shift the whole market.

Currencies, too, will feel the impact of news and negotiations, offering opportunities to trade the waves – or seek calmer waters. And don’t forget that cryptoassets were invented as an alternative to a government or central bank-controlled monetary system.

Whatever happens, through the eToro platform, you can be ready to take advantage of upswings on stock and currency markets and use our risk management tools to limit the downswings.

Cabinet reshuffle? Budget bonanza? Trade deal trade off? Whatever happens during the post-Brexit negotiations, stay plugged in and up to date with events that could offer opportunities to trade.

As the clock struck 11pm on January 31, fireworks lit up UK skies with those that had voted to exit the European Union partying in the streets.

It was the best of times, it was the worst of times – however you felt about the UK’s time in the European project, at 11pm GMT today it will all be over.

Yesterday was the day the nation took to the polls to decide who will be the next resident of Number 10 in the first Christmas election for nearly 100 years.

It’s official. The UK has a new Prime Minister. Now what…?

Banks hit the headlines for all the wrong reasons in 2008 as some of their practices got them in to very hot water and they crashed the whole global economy…

The Great British High Street is not enjoying a purple patch right now…

Deal or no deal, no one really knows what will happen to financial markets in the days after the UK leaves the European Union – but there are places to hide should they get really choppy…

In one of its “disorderly Brexit” scenarios last year, the Bank of England warned UK house prices could fall by 30%…

Since June 2020, sunbathing with a sangria has cost Brits more than it used to…

Sterling’s fall in recent years has been nothing if not dramatic…

What goes up, must come down, but equally it might go up again – and that’s where stock markets get interesting…

Brexit. The term sends chills down the spine of many investors for its continued disruption of the UK’s stock market – but it could hold significant value to those willing to look closer to home…

Remember when you had to book holidays in a travel agent? When you fell out with real friends rather than blocking people on social media?

Live prices on popular markets.

Plan your strategy with help from eToro and benefit from Brexit.

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