Brexit indecision causing market tunnel vision
The UK government remains deeply divided on what a Brexit deal should look like even as the eleventh hour draws near.
Share this:
Earlier this week the shadow Labour Brexit minister Keir Starmer said that Labour would torpedo a UK free trade deal that is now being backed up EU Chief negotiator Michel Barnier. It raises a big question mark over the prospects of the deal if it came into the House of Commons for a vote.
The Canada-style proposal envisages no tariffs on imports and nearly avoids checks on imports. At the same time extreme Tory Brexiteers find Starmer’s ideas of closer ties with Europe unacceptable leaving little hope for middle ground.
Markets remain jumpy over the issue, particularly forex markets where the pound is pushed lower every time it raises its head a bit with the threat of the no-deal Brexit remaining the main concern. However, despite not being able to form a coherent trend higher the pound has also not seriously declined over the last year, instead trading in a bit of a tunnel between 1.1 and 1.15 against the euro.
The Canada-style proposal envisages no tariffs on imports and nearly avoids checks on imports. At the same time extreme Tory Brexiteers find Starmer’s ideas of closer ties with Europe unacceptable leaving little hope for middle ground.
Markets remain jumpy over the issue, particularly forex markets where the pound is pushed lower every time it raises its head a bit with the threat of the no-deal Brexit remaining the main concern. However, despite not being able to form a coherent trend higher the pound has also not seriously declined over the last year, instead trading in a bit of a tunnel between 1.1 and 1.15 against the euro.
And, while Teresa May is frantically working to ensure favourable deals with other trade partners such as African and Asian countries, most notably China, the government is in the process of drawing up a plan B, a contingency that assumes a hard Brexit.
As the Treasury gets ready for the UK autumn budget, Chancellor Philip Hammond is expected to avoid large-scale tax increases and spending cuts.
The stock market is finding it harder and harder to trade upwards in the face of a looming no-deal Brexit. While on the one hand the slight weakening of the pound is helping UK exporters and an overall bouncy mood in US stock markets is also providing some upward lift, overall too large a segment of companies is going to be affected by Brexit for the FTSE 100 to hold its ground.
On a six month basis the index has declined 7.22% compared with the Dow Jones Industrial Average which has bounced up 4.8% during the same period.
There is also the danger that many overseas investors are starting to sit on the side lines to see what the outcome of all this wrangling will be. There are very obvious fears that a drop in the pound occasioned by a hard Brexit or even an unfavourable deal could wipe out gains between now and March.
This is focusing the minds of non-sterling investors including overseas funds, and removing some important buying activity from the market.
Latest market news
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
EUR/USD Update: Will Fed Expectations Keep Pressure on the Euro?
The week continues to present challenges for the euro's short-term strength. This is reflected in the recent performance of EUR/USD, which has declined by nearly 0.6% over the last three trading sessions
British Pound Short-term Outlook: GBP/USD Selloff Breaks June Uptrend 9 22 2026
Sterling has slipped below its 200-day moving average as downside momentum carries GBP/USD toward another major technical support zone.
British Pound Forecast: GBP/USD Heads for Biggest Weekly Drop Since May 9 17 2026
Sterling selling has intensified after the September range broke lower, with GBP/USD now confronting a major Fibonacci support zone.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.