Good morning,

Yesterday was quiet, with the day mainly orientated around chatter from over the weekend regarding Brexit predictions and timeframes. There is very much a ‘calm before the storm’ feeling as today remains pivotal in the development leading up to the summit commencing Thursday. The general narrative condemns a deal outcome to an ever-thinning possibility, with various odds sharing the 10-20% range, however, anything is of course still possible.

Barnier, the Brussels chief negotiator, commented on the developments stating that a new withdrawal agreement is “still possible”, however clearly sharing the same sentiment of a waning likelihood.

The effect that the outcome can have on the pound is now so significant that it is hard to ignore.

This last week has really highlighted the sensitivity factor, with a Bloomberg article citing the vulnerability the pound has shown; with predictions from major banks, including Morgan Stanley on a hard Brexit bringing a drop to parity against the Dollar. The effect this weakness may have on connected markets is a rising concern now, particularly in the Eurozone, with a struggling manufacturing sector economy under risk of losing a significant portion of its GDP following frictions from a hard Brexit.

Outside of the Brexit radar, as if by clockwork, after mentioning the more positive elements between the US/ China with an underlying warning of some hurdles along the way, things slowed. China are seeking further clarification on matters relating to the trade deal, showing a less than optimistic view on the matter.

As ever, with matters of uncertainty around the trade talks, and thus further global tremors, the haven currencies provide sanctuary for the uncertain money to move, with the JPY moving against most of the G10 to start this week, in particular on the USD, giving up 0.1% from the recent rise.

Have a great day

Author: Ross Hammond, Senior Corporate Account Manager