Mid-October proved to be a particularly
volatile time for the British Pound as Prime Minister Boris Johnson headed to
Brussels to wind up what ended up emerging as the deal to end all deals, and
putting to rest (at least theoretically—we still have the December 12th general
election and all its Brexit-related aftermath to look forward to) the
possibility of a no-deal Brexit.
As the ostensibly-victorious Johnson
hunkered down with his EU counterparts in Brussels, and news that a deal was
within reach got out, the pound began a steady ascent, demonstrating
considerably more potential against the Dollar than the euro. As a matter of
fact, according to PoundSterlingLive, the GBP had converted its 2019 losses
into profits against all the so-called safe haven currencies this month. This
bout of volatility can best be illustrated by focusing on the Pound-to-Dollar
and Pound-to-Yen exchange rates. The Sterling shot up 1.92% against the USD,
hitting a 1.1% gain for 2019. Yet, at the same time, the Pound-to-Yen exchange
rate went from -2% loss up to 2.26%.*
It’s also worth noting, especially if you
follow the more political angle of the Brexit saga, that the rise in the pound
pushed it above $1.26 for the first time since Boris Johnson took control of
the Conservative party.
Then there’s the euro. During the same week, the GBP also hit close to a five-month high against the euro of €1.1465.
What did it mean for investors?
As far as forex investors are concerned,
analysts still urge caution. “The news will have cheered sterling investors,
but we recommend they remain nimble with much still uncertain as the sand in
the Brexit hourglass continues to run down”, said Dean Turner, an economist at
the Swiss Bank UBS in an article for The Guardian. But investors whose focus is
on indices watched as London’s FTSE (tracked at Vestle as the UK 100), which
includes many medium-sized UK firms, ascended 4.2%—capping its biggest one-day
jump since May 2010.**
What could happen next?
Plenty. Since the deal was announced by
Boris Johnson and EU Commission President Jean-Claude Juncker, Market Watch
reported that the pound continued an upward rise, hitting $1.29 by Thursday,
October 17th. Analysts even said that the rise could continue until the pound
hits $1.30 or—should the deal receive approval from the UK Parliament—$1.35. In
the same feature, a senior analyst at Caxton commented that the future movement
of the pound depends on whether the deal passes, so it’s worth sticking around
for news updates, especially on sites like Vestle and the Vestle mobile
app, where economic news is always reported. The new date for Brexit has
been set for January 31st, 2020, and plenty could happen between now and then.
There are two other hurdles in the way. The
first is whether or not the DUP—Ireland’s key political party—approves the
deal, and if the most recent reports are any indication, they probably won’t.
The second is the General Election, set for December 12th, which could change
the entire trajectory of Brexit—even putting the kibosh on it altogether.***
The bottom line
With so many elements at play, there’s no
way to tell what the end result will be. All you can do is stay informed and
gather the facts. Whether you’re an investor interested in trading the currency
pairs we’ve mentioned above or you just like to know what’s going on in the
financial world, at Vestle, we’re always
on the pulse of economic news, because we know how important it is to keep
our clients aware of the world events that could impact their CFD portfolios.
Stay tuned to the Vestle
Economic calendar for a current list of crucial events which could affect
the markets. If you’re interested in how to spot potential opportunities within
such market volatility, Vestle offers over 800 tradeable CFD instruments, plus
free educational resources to help you understand the risks involved and make
more informed decisions.
The materials contained on this document have been created in cooperation with Vestle UK and should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. Full disclaimer: https://www.vestle.co.uk/legal/analysis-disclaimer.html