Please find below our Weekly Market Update for the week ending 18th October 2019.
Blue Sky Comment
The pound surges but what will be its direction of travel?
The pound rose on the back of a deal being struck with the EU, although the price ebbed as it has become clear that the vote in Parliament will be close.
Against the Euro, Sterling rose as high as 1.1657 and against the Dollar, Sterling rise to 1.285.
If the deal is not passed, expect the pound to weaken. If it is passed, then many analysts, like those in Danske Bank, warn gains may be limited as much of the optimism is in the price.
Failure to pass a deal may not be terrible for the currency, according to PoundSterling Live.
If an extension is called for, which ultimately leads to an election in which the Conservatives campaign on a ‘deal’ ticket, then it becomes increasingly hard to see how a ‘no deal’ might come about. Indeed, the big loser of the past 24 hours is ‘no deal’, and this offers some substantive downside protection for Sterling.
Analysts at Danske, believe the Conservatives are better positioned in an election with a deal on the table. In other words, the Sterling outlook is better from a tail-risk perspective, as the prospect of a ‘no deal’ has diminished, although it is still on the table. If a ‘no deal’ somehow was to happen, by circumnavigating the Benn Act, then we should expect significant chaos and weakness of Sterling.
Saturday should be interesting.