Is the Market Bored with Brexit?
The Supreme Court ruled that the decision of Boris Johnson to prorogue Parliament this month lacked reasonable justification, strengthening the pound. However, the Pound sterling has still been under fresh pressure on rising concern over the Brexit limbo. The PM Boris Johnson told MPs on Wednesday that he would not commit to seek for a Brexit extension, calling it the surrender act.
“UK politics remains the centre of attention in sterling markets. While the pound was initially lifted by the Supreme Court ruling, it has settled lower again on market perceptions that uncertainties about outcomes remain high and all possibilities are still on the table” says Hann-Ju Ho, Economist with Lloyds Bank.
GBP/USD Hourly Chart
The GBP/USD reached the highest level at 1.24984 after the release of the Supreme Court decision but stumbled to the lowest level at 1.23442 on the next day 25th September. There has been no sign that the pound sterling will gain its rising momentum and has been still below the level before the Supreme Court’s decision.
With a break of the 1.23 mark, further momentum could carry the Pound lower against the US Dollar, with the next key support sitting at the 1.2230 area. The deadline for Brexit is on the 31st October, which Boris Johnson wishes to stand by.
The US Dollar index weakens for the 7th straight day as investors’ appetite for risk increases. The AUD/USD has broken the 0.69 mark, with the USD weaker against its G10 currencies, with global indices rising on forward optimism on a quicker recovery from the effects of the Coronavirus. US Indices have seemed to quickly discount the effects of the protests as they continue for the 8th straight day.
A couple of weeks ago, I wrote an article about the decorrelation between Wall Street and Main street. Back then, this was related to the Coronavirus’s impact on everyone in the light of Wall Street’s impressive rally. While Main street is still reeling from the devastation the Coronavirus has brought, current protests due to another incident involving a white policeman killing a black man have sparked outrage all over the country.
Will Hong Kong abandon the peg against the USD? The financial hub of Asia, which connects the East to the West has been in the middle of pissing contest between the United States and China, not to mention their domestic struggle between them and China. If protests for autonomy in Hong Kong continue, and President Trump implements drastic foreign policy measures against Hong Kong, extreme capital outflows may ensue, forcing the Hong Kong Monetary Authority to abandon its peg on the U.S. dollar.
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