Good morning,
Yesterday we cleared the first hurdle by agreeing on a Brexit deal – the real crunch comes this weekend. With the DUP already publicly opposed, no outcome can be reliably predicted.
If the vote doesn’t get through, the pound will be at the mercy of the next steps in considering an extension. Despite comments yesterday from Juncker, the EU hasn’t completely shut the door to an extension, however, Johnson remains steadfast on the 31st of October as the leave date. Without going into the political chess game needed to enable this, the point is that this is still a factor to be priced in and considered in the pounds outcome.
On the flipside, if the vote clears then the appetite for the pound is strong and with the Bank of England passing comments that a smooth Brexit could lead to potential rate hikes, predictions of a 5% appreciation may not seem so far-fetched. Key members of the Bank of England speak tonight, and so it will be interesting to see their narrative going into the weekend.
The outlook remains cloudy and our sentiment is that, without being able to depend on any outcome, covering any downside relating to your FX needs is essential, as the moves are likely to be massive when things become clearer.
Please contact your relationship manager if you wish to discuss placing an instruction to buy or sell at a specific price over the weekend as thin access to the markets will prove difficult to target over the weekend.
WorldFirst extended trading hours will begin Sunday evening, decision dependant, with access to a dealer Monday 06:00 if a deal instigates large fluctuations.
Have a great weekend.