GBP/USD shrugs off government’s Brexit report
Fawad Razaqzada November 28, 2018 7:20 AM
The pound was already higher before the government’s analysis of Brexit scenarios report was released this morning, climbing from a low of $1.2735 to a high of about $1.2790.
The pound was already higher before the government’s analysis of Brexit scenarios report was released this morning, climbing from a low of $1.2735 to a high of about $1.2790. The beleaguered currency actually managed to climb further higher – hitting the $1.28 handle – despite the Long-Term Economic Analysis paper suggesting that Prime Minister Theresa May’s Brexit plan will make the economy worse off than if we were to remain in the EU. According to the government, the UK economy would be 3.9% worse off in 15 years’ time after Brexit, although output could be even lower – by some 7.7 per cent – if Britain leaves without a deal. The pound’s immediate reaction suggests two things. First, investors had already discounted the impact of Brexit on the economy – hence why the currency tumbled in the first place post the outcome of the referendum in 2016. Second – and assuming the government’s analysis is correct – it is a relief that output would ‘only’ drop 3.9% in the long term, as some economists had predicted much severe economic damage from leaving the EU. However, despite the rebound, it is worth pointing out that investors are not exactly scrambling to buy the pound, with the currency still remaining in the lower half of its recent trading range. There’s a chance – a good chance, in fact – that Parliament will not pass the Brexit Withdrawal Agreement next month. Consequently, sterling’s upside will remain limited at least until after that parliamentary vote is out of the way.
Source: TradingView and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.