Good morning,
The pound remains relatively unphased upon market open following the decision to extend the Brexit deadline till the end of January, whilst Boris Johnson lost the vote last night for a general election.
Today, he will pick himself up and begin pursuing the third general election in the last four years. The tactic is to take a simpler legal route to increase the odds of success, bolstering the public support from the SNP and LibDems to lock in an election early December still.
As ever, the outcome of the mathematical tic tac toe unravelling to get the numbers to leave are difficult to predict, and as such, this would seem to explain the apathetic movement in the GBP as of late.
Eyes shift over to the US more so this week, as the currency market will likely relish in steering away from predicting politics and pricing in central bank policies.
Whilst markets have priced in a rate cut tomorrow, the strength of the USD is certainly under some debate. On the one hand, a weakening Dollar following an expansive policy from the Federal Reserve cutting rates would indicate the Dollar would follow suit and depreciate.
However, circumstances are not “textbook”, with a myriad of intruding factors, around trade concerns, Brexit and global slowdown talks. The latter leading to weaker currencies around the world, and low to negative interest rates keeping the USD an attractive prospect in the scheme of things with its positive rates intact.
A pick up some of the other larger economies may be the match that could light the flame of a depreciating USD, particularly Europe. This circles us back to the unpredictable outcome of Brexit and the ‘wait and see’ stance we sit in.
Have a great day.