The earnings season in the United States is still on. This means that stocks of the largest American companies will likely make big moves.
Boris Johnson and the ordeal of the GBP
The United Kingdom experienced some major political changes: Boris Johnson became the country’s new Prime Minister. The previous PM Theresa May stepped down as the leader of the Conservative party on June 7 as she was not able to deliver Brexit. Johnson, on the contrary, occupies an outspoken pro-Brexit position. The promise to take Britain out of the European Union on October 31 “no matter what” was the key element of his campaign and he shows all intention to deliver.
The first step has already happened: Johnson filled his cabinet with Brexit-supporters. The agenda for the new cabinet is to persuade the EU to agree to a new withdrawal deal. According to Johnson, if Brexit with a deal is to happen, then the notorious Irish border backstop should be dealt with separately.
The impact on the GBP
As you can see, a month and a half have passed since May’s resignation. Boris Johnson has always been the main candidate for the position of the PM. As a result, investors had got pretty used to the idea that he will be the one to take charge. In other words, Johnson’s leadership and his determination to have Brexit, even a no-deal one, is mostly priced in the pound’s exchange rate. That’s why the GBP didn’t crash on the news: on the contrary, the GBP managed to stabilize a bit versus the USD and the USD as traders took profit on their GBP shorts.
Despite this fact, the general sentiment for the GBP is rather sour. At this point, the uncertainty on how exactly Brexit will happen stands. Moreover, the risk of a General Election at some point has increased. Finally, the current government doesn’t have an overwhelming parliamentary majority which makes its position shaky. All this means that the long-term bearish trend for the GBP remains intact.
In the upcoming days, the market will be sensitive both to comments from Johnson’s office and the European policymakers as both parties will tread water and reconnoiter the ground. It’s clear that the sides are extremely divided. So far, Europe claimed that they wouldn’t rewrite the withdrawal agreement, but could be willing to change a so-called political declaration on future ties.
In the near-term, the good thing for the GBP is that Johnson doesn’t renounce the possibility of a compromise. Such an approach keeps the “Brexit-with-a-deal” option on the table and thus provides the GBP with some support.
Given all said above, the current situation warrants an approach of selling the GBP on its attempts to recover, although having reasonable and modest targets. Remember that two members of the Bank of England (Haldane and Saunders) indicated they are not likely to vote for a rate hike in the near term.
Will the new ECB president continue the monetary policy of Mario Draghi or there will be a new direction? We discuss what changes Christine Lagarde may bring to the Eurozone and how it may affect the euro.
Walt Disney will release its financial results on Thursday, November 7. Let’s have a look at the fundamental and technical picture for this stock.
GBP/USD has been consolidating between 1.30 and 1.2770 for the past month. The pair met resistance at the resistance line connecting October and November highs.
AUD/JPY has reached the support line connecting August and October lows in the 73.30 area. What's next?
The USD started the day dropping against the Canadian dollar, now on a bullish reversal.