Search LOGIN

WEEK AHEAD: OCTOBER 12

Short Description

Brexit is back! UK Prime Minister Boris Johnson has set this Thursday as a deadline for an EU/UK trade deal to be made so I’ll my view on that and what it means for British pound forex pairs like GBP/USD - and I rundown the week’s economic calendar. Thanks! Rich

Video Script

Trading GBP before October 15 Brexit deadline - THE WEEK AHEAD (Oct 12 - 16, 2020)

Hi everyone, I’m previewing the week ahead and it feels like it’s been a while but we have another big Brexit deadline coming this week- as well as – health dependent – the second US Presidential debate. I’ll give my latest take on what Brexit means for the British pound as well as rundown highlights from the week’s economic calendar.

Now before we get into the heavy stuff – here’s a couple of jokes for you. An Englishman, an Irishman and a Scotsman walk into a bar… BUT the English one wanted to leave so everybody had to…. Me personally’ I’m going on a Brexit diet – the pounds should drop fast!...

If they gave you a chuckle please hit that like button – or if you didn’t get them – drop us a comment and we’ll explain! Either way it really helps us spread the word about these videos!

It’s the Columbus Day holiday in the US on Monday- US markets will be open but the only event of note is BOE governor Bailey giving a speech. China releases trade balance data on Tuesday, and then we have ZEW data for October which is expected to show German economic sentiment deteriorated in part because of the second wave of virus cases in the country. There’s also US CPI. There’s nothing of note on Wednesday but Thursday is the big one with the EU summit that Boris Johnson set as a deadline for the UK to walk away from trade talks, Australian employment data, China inflation data – and the second Presidential debate which is late Thursday in the US so early Friday for the rest of the world. Then on Friday we round off with US retail sales and Michigan consumer confidence data. 

Now Brexit deadlines have a history of being ignored thanks to the political tendency to kick the can down the road- meaning they just always delay the decision. October 15 could easily be another one of these. BUT there are only two-and-a-half months until this deal needs to be put into practise. There needs to be time for a deal to be agreed in the UK parliament, it needs to be ratified by all 27 member EU states and the systems need to be in place to implements the new rules next year. So the can can’t really be kicked much further!

As we well know by now- the pound drops when no trade deal - whereby the UK would trade with the EU on World Trade Organisation terms - looks more likely. As such, this week the pound is going to be extra sensitive to headlines about progress or lack of progress toward a deal. With the US election so close GBP/USD will also be heavily affected on the dollar side of the equation. So in my view, for trading Brexit – other currency pairs like EUR/GBP and GBP/JPY might be more straightforward.

Can a deal get done before Thursday? For what it’s worth Goldman Sachs analysts predicted last week that a ‘skinny trade deal’ will be agreed by early November, suggesting markets are pricing in uncertainty that was they say “no longer warranted”. They have urged clients to buy the pound over the euro in expectation that the EUR/GBP pair will drop to 0.87. However economists at Berenberg and Fitch rating agency think that there is not enough time left to bridge the differences – especially after the UK published its Internal Markets Bill, which undermined trust on the part of the EU. I’ll be watching 0.90 in EUR/GBP and 1.30 in GBP/USD for clues on which way we go.

Right thanks everyone, good luck trading and make sure to subscribe to our channel so you don’t miss the next video.
 

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. See our full Risk Disclosure and Terms of Business for further details.