background image

Sterling hammered by Brexit warning

Michael O’Neill

FX Trader,

What a difference a few hours makes. New York traders awoke and found the US dollar very modestly lower against the G-10 major currencies; the Japanese yen was the exception. The overnight session had been uneventful except for a nasty short squeeze in NZDUSD.

Sentiment started to shift when Bank of England Governor Mark Carney started chirping. The governor’s made the glaringly obvious statement that “there would be big economic consequences in the event of a no-deal (Brexit) scenario.” GBPUSD traders, who earlier ignored a slowdown in average weekly earnings, started selling GBPUSD. Elevated Brexit fears and the possibility of a leadership challenge to Prime Minister May exacerbated the drop from 1.3267 to 1.3145.

The GBPUSD retreat kicked off a fresh wave of US dollar demand. USDJPY, which opened in New York at 112.38, was probing resistance in the 112.75-80 area at 1400 GMT, just as Fed Chairman Powell’s Congressional testimony began. EURUSD followed GBPUSD lower, dropping from 1.1728 to 1.1685.

The commodity currency bloc sank en masse. Kiwi erased all of its earlier gains. USDCAD rallied from 1.3127 to 1.3187 with free-falling WTI oil prices helping the move.

Wall Street opened lower, in part becomes of a drop in Netflix (NFLX: NASDAQ) and on caution ahead of Jerome Powell’s speech. The Fed chair repeated that the central bank should continue gradually raising interest rates because of strong economic growth and stable inflation. US economic data was in line with forecasts 

The intraday and short-term GBPUSD technicals are bearish while prices are below 1.3340, supported by this morning’s break below 1.3210. Additional weakness below 1.3130 would set up a test of support at 1.3030.

Chart:GBPUSD daily.                                                                                               Source: Saxo Bank


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (
Full disclaimer (

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide and Product Disclosure Statement to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as CFDs and Margin FX products may result in your losses surpassing your initial deposits. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.
Please click here to view our full disclaimer.