It seems we might be but GBP has perhaps not reacted as much as we might expect
There could be a few reasons for that.
- We still need an official confirmation. We’ve been here before many times for it to all fall apart at the last moment. We also need to hear from the key players that any deal is agreeable (Boris’s own MP’s & France etc). After that (if all is good) the ratification is a formality.
- Holiday markets. I’ve noticed this week that we’ve had big news moves well after the event. Sunday was such a time where cable dropped 100 pips but it wasn’t until the UK open that it really went. Late last night the mood on Brexit turned a bit more positive than what we’d heard earlier in the day yet we didn’t really move until this morning again. That means we could see some catch up buying when markets come back next week, or even in the New Year, as that could be when investors really decide to come back into GBP.
- We may well see/be seeing a ‘buy rumour. sell fact’ situation as the market has never really given up on a deal being done.
Overall I think there’s a possible scenario to consider here. We get official confirmation and the quid pops again but then runs into a ton of profit taking and (depending on timing) year-end stuff next week. Then when we come back in the New Year we see what the real outcome will be. I think that will be further gains for GBP because Brexit is one huge roadblock removed for the UK, and risk event for the BOE. Investors will start coming back into UK assets which could mean a trend emerges. Of course, we still have the virus to deal with in the meantime so that could hinder such moves too.
I’ve been core long GBP for the last few months in expectations of a deal, and on a deal, I’ll keep the position to see what the new year brings. But, I don’t want to get ahead of myself until the ink is on the paper for a deal, and I want to see the details too. If we do get to the New year and there’s no follow through GBP buying, I’ll be looking to get out sharpish.
So, this could well be the end of Brexit, or at least the beginning of the end (the politics will continue for a long while yet). We’ve had many long years of this and while at times I could have taken an axe to my PC/twitter/clown politicians over the to and fro of it countless times, we will miss it when it’s all over….won’t we? 😉
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