A spike in ‘hard Brexit’ fears may be just around the corner

There’s something worrying about the current state of Brexit. I noticed it last week and now more so this.

Last week I noted how Theresa May had come out with slightly stronger hard Brexit tones than previously. It wasn’t hard enough for two big shots in her party (David Davis and Boris Johnson) but it was a change nevertheless. Now we’ve had concessions to staunch Brexiteers in her party.

The winds are starting to blow a bit more firmly in the direction of a hard exit and that’s seen as negative by the market. I don’t think the market is getting that message just now, or it is but it’s not seeing as much trouble as I do.

Of course, things could change with a comment or headline but at the moment, I’m seeing these sublte changes to the Brexit picture and as a trader, I’ve got to take note of them.

We’re still awaiting a full EU response and the talks are ongoing this week. Previously, I said that the we should watch for an initial EU knock back but then positivity that May’s white paper was a proper starting point but now I’m wondering how much give there’s going to be on the UK side. May could be playing it clever and letting her rebels put their necks on the line. If the EU wholeheartedly rejects everything, she’ll then have a case to point the finger at the rebels and say “Well, what now then?”. She might also be throwing in the towel to rebels and goiong along with them.

Brexit has been ‘tidal’ between good news and bad since the start and maybe this is just one of those times where it’s changing momentarily or for a longer period. Irrespective of my thoughts, Brexit remains the number one risk event for the pound and it will continue reacting as it has. Whatever your views are of Brexit, you know how the pound moves over it so as long as you factor that into your trading, you shouldn’t get caught out.

Ryan Littlestone

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