How’s Brexit going?

Christopher Dembik

Head of Macro Analysis

Summary: The GBP is back under 1.20 USD, the lowest level since January 2017 due to a sharp increase in political risk and a lot of confusion regarding what will happen at the political level by the end of the day.

The market situation this morning: the GBP is back under 1.20 USD, the lowest level since January 2017 due to a sharp increase in political risk and a lot of confusion regarding what will happen at the political level by the end of day.

What we know:

The PM Boris Johnson confirmed this morning that he is “committed to leading (the UK) forward and getting Britain out of the EU by October 31^st”.
Corbyn is meeting opposition parties and the Labour Party indicated it won’t back snap elections on PM’s terms.
If the Brexit extension bill is voted today, it will have key political implications as it states that the European Union can choose the length of the extension – without a limit – and the Prime Minister must agree to it.

We identify three outcomes for today’s vote:

The Brexit deadline is confirmed – NEGATIVE for GBP, but it has already been priced in in the market.

The no-deal Brexit scheduled on October 31^st is taken off the table by the Parliament – POSITIVE for GBP, and it would certainly mean Brexit extended into infinity as the EU can choose the length of the extension.
The MPs approve a snap election (initially to be held on October 14^th). POSITIVE in the short term but might lead to more confusion in the medium term. Indeed, Philip Hammond rightly pointed out this morning that if the Parliament approves a general election, the Prime minister Boris Johnson could just change the date of it until after Brexit deadline. This scenario does not take off the table the risk of hard Brexit, contrary to what has been said here and there since yesterday. On the top of that, Corbyn risk would also be back for investors, thought we consider it is less harmful for the GBP, at least in the short term.

On a final note, it is highly certain that today’s vote will not bring much clarity regarding Brexit process. At best, depending on the scenario that prevails, we can see some short-term relief for the GBP, but the currency is doomed to depreciate further in the long run as the political saga continues.

Quarterly Outlook Q1 2023: The models are broken

The models are broken
The market is trying to get back to the pre-Covid and pre-war times, but that model is broken. A new dawn is here and the financial world needs to adapt.

Steen Jakobsen,
Chief Investment Officer
Read article
Refitting China’s broken growth engine
A political switch in China towards less tough control of its people and companies may kick things back into gear.

Redmond Wong,
Market Strategist
Read article
Broken Europe
While the economic situation in Europe may not be as bad as feared, there's still a plethora of things to fix.

Chris Dembik,
Head of Macroeconomic Research
Read article
A painful phase transition
As the world turns increasingly bipolar, equity markets face harsh times as they transition into the new reality.

Peter Garnry,
Head of Equity Strategy
Read article
Opportunities in a deglobalising world
New alliances and collaborations outside of China may lead to prosperous times in Asia.

Charu Chanana,
Market Strategist
Read article
Is the ‘balanced’ 60/40 equity/bond portfolio a thing of the past?
For years, it was thought that the balanced portfolio was a thing of the past. But recent developments may have changed that.

Peter Siks,
Investment Coach
Read article
China reopening will drive another strong year for commodities
Following a dramatic and volatile 2022 with good returns, a lot of this year's commodity performance may be driven by Chinese politics.

Ole S. Hansen,
Head of Commodity Strategy
Read article
Latecomers to tightening party, EUR and JPY, may prove safest harbours in the first half
2023 could be a tough year for currencies but EUR and JPY may have some upside.

John J. Hardy,
Head of FX Strategy
Read article
China reopening a boon to Australian assets?
The commodity-heavy Australian market may have a good start to 2023, as the Chinese focus on growth signals demand for Aussie resources.

Jessica Amir,
Market Strategist
Read article
Can institutions save crypto before retail vanishes?
From a near-perfect environment for speculative assets before 2022 to the opposite, crypto faces fundamental challenges.

Mads Eberhardt,
Cryptocurrency Analyst
Read article

You can access both of our platforms from a single Saxo account.

Preview platform Open Account

Disclaimer

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 is not intended to and does not change or expand on this. 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 (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

Manage consent

Details Cookies

Cookie policy

Necessary

How’s Brexit going?

Christopher Dembik

Share

Latest Market Insights

Quarterly Outlook Q1 2023: The models are broken

The models are broken

Refitting China’s broken growth engine

Broken Europe

A painful phase transition

Opportunities in a deglobalising world

Is the ‘balanced’ 60/40 equity/bond portfolio a thing of the past?

China reopening will drive another strong year for commodities

Latecomers to tightening party, EUR and JPY, may prove safest harbours in the first half

China reopening a boon to Australian assets?

Can institutions save crypto before retail vanishes?

Your browser cannot display this website correctly.