Morning Commentary: Brexit – Into the Final Stretch Drive?

Foreign Exchange - Morning Commentary
Brexit – Into the Final Stretch Drive?
Share this story:
Alan Rose
Alan Rose
Foreign Exchange Senior Trader
Headlines overnight that the EU and the UK have agreed on a draft Brexit deal have initially sent the markets into jubilation. The British pound (GBP) spiked higher almost touching $1.3000 and reaching its best levels since May; U.K. interest rates and EZ and UK equities also moved sharply higher. Since October 9, headlines about progress in the Brexit negotiations have caused the GBP to rise against the U.S. dollar by nearly 5%.

But since the initial headlines and market reaction, markets have corrected lower as there is still much work to be done. There is still the matter of getting the DUP
Party of Northern Ireland on board and more importantly, the question of whether PM Boris Johnson has the parliamentary arithmetic to get the necessary votes for potential approval on Saturday.

Thus, early morning optimism has given way to Brexit still remaining a bit of a high wire act going forward and markets have reflected those concerns. Since the early headlines, the DUP Party indicated that they are not on board yet which has caused the markets to correct their enthusiasm. While EZ stocks remain in green territory, U.K. 2-year interest rates have returned to ground zero at 0.52% after spiking to 0.63% earlier, and the GBP has given back all its gains to be unchanged on the session.

PM Boris Johnson must be given credit for the progress that has been made. Many in his own party and within Parliament were skeptical of his ability to negotiate a successful conclusion to Brexit, but he has shown determined perseverance. While there are still impediments to a successful conclusion of Brexit, it would appear that we are closer to a conclusion than not as getting the EU on board was paramount to this issue. While the GBP will remain volatile in the short term, it would appear to be better bid going forward.
  • Australia reported a solid September jobs report. Total jobs grew by nearly 15,000 with full-time jobs gaining 26,200 while part-time jobs fell by 11,400. The UR fell from 5.3% to 5.2%. The probability of the RBA cutting interest rates on November 5 has fallen from nearly 40% to 18%. The RBA has cut interest rates three times in the past five months to help support the economy.
  • U.S. industrial production and housing starts for September were disappointing. Industrial production fell by 0.4% against expectations of a decline of 0.2% as the data was depressed by a strike at GM which appears to be on the verge of being settled. The fall in industrial production is the biggest decline in the past five months. Housing starts came in well below consensus at 1,256,000 as multi-family starts declined sharply; building permits came in stronger than forecast which is a positive sign for future growth.
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2019 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog