Morning Commentary: Brexit – Ad Nausea

Foreign Exchange - Morning Commentary
Brexit – Ad Nausea
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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
Markets remain largely consolidative and range bound in the medium term but very volatile in the short term. Global equities, interest rates, commodity prices and the U.S. dollar continue to trade in narrow ranges as investors and traders have priced in most of the positive or negative news. We appear to be near an equilibrium point in weighing and balancing economic data, geopolitical hotspots, and central bank activity. However, one story keeps on giving and continues to cause market disruptions: Brexit.

As the trial and tribulations of Brexit marches on, I am sure our readers are as tired of hearing about Brexit as we are about writing about it. But in the short term, this story concerning Brexit will continue to provide short term market volatility and direction either positively or negatively for all asset classes. The ECB meets this Thursday and the Federal Reserve meets next week so we are hopeful of a new theme or story to write about very soon.

Yesterday, PM Boris Johnson won a key vote in Parliament on his Brexit bill but lost another vote which would allow his Brexit bill to become law in time for the October 31 deadline. Markets are anticipating the EU will grant a timeline extension to allow Parliament to ratify the agreement. But, a general election in the interim remains a possibility creating additional uncertainty. The British pound gave ground yesterday after the second vote but has since stabilized and traded in a narrow range overnight. While the chances of a No-Deal Brexit are extremely minimally low right now, the clarity regarding an actual Brexit remains elusive.

We are hopeful of a resolution to this story as we are hopeful that the U.S. and China can find common ground for a trade war resolution next month. Continue to expect headlines revolving around these two issues to dominate market psychology in the short term.
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