Fracture between Brexit economics and Politics is growing

During a month in which the financial markets awaited the confirmation that no deal would not be a valid option for Brexit, all it took was the first glimmer that a deal may be struck to see the pound rally significantly.

There has clearly been an incredible amount of horse-trading across the entire political spectrum which has thrown up several sets of strange bedfellows to allow Parliamentary possibilities to come about. First, the main opposition Labour Party is now fully supporting a second referendum despite that now being the least likely outcome. If the deal that Mrs May eventually presents to Parliament is rejected then MPs will get to vote on no deal or a delay in Brexit.

Despite there being no question of a second referendum, which means Brexit is still happening, at some point FX traders are sufficiently encouraged to abandon what has been the default “Brexit bad, no deal worse, but any delay hopeful” mantra that has been in place since Florence.

The pound’s rally continued yesterday, reaching 1.3351 and closing at 1.3304. While debate rolls on, the economic data coming from the UK has been encouraging although there have not been the peaks and troughs that have been seen in other G7 nations. Consumer confidence continues to fall but has been bolstered somewhat by the positive and widening gap between wages and prices.

Considering your next transfer? Log in to compare live quotes today.

February volatility fall concerns traders

I wrote recently about not second-guessing Central Bankers despite a new era having dawned across the political and economic landscape of the U.S.

The drop in volatility being seen across financial markets in February is a sure testament to the advance warning and continued fortitude of the FOMC in sticking to its planned approach.

The U.S. market, with its Capitalist roots, absolutely thrives on the one thing that markets generally rail against: volatility. Without a volatile market, traders find it difficult to make money which feeds through into just about every pore of the U.S. economy.

With the trade discussions between China and the U.S. continuing, Brexit likely to affect every part of the global economy, and Central Banks needing to “up their game”, traders are hopeful that the market will pick up as Q1 ends.

The interaction between currencies, where the dollar and single currency are simply mirroring each other, has never been more obvious and implied volatility is at multi-month lows. The fall in volatility and continuing low-interest rates will provide fuel to the global economy which will highlight output and performance differences driving volatility back up again.

Yesterday, the dollar index fell initially, reaching a low of 95.88 before rallying back to close at 96.17.

Euro bad news getting “less-bad”