Morning Brief – Thursday 1st

Yes! No! Yes! NO! YES…! Maybe.

 

Well, that’s the Pound covered in a headline. Overnight, announcements claiming that the European Union and the United Kingdom were millimetres away from securing a deal for post-exit financial services allowed the Pound to secure an enormous bid. The fun came to an end momentarily at 10AM with markets questioning how robust the deal may be. Despite the momentary panic, the rally continued steadily before the Chief EU Negotiator/excitement extinguisher, Michel Barnier, joined the party, noting the “misleading” nature of the morning’s reports.

 

 

 

The story thus far: Yes! No! Yes! NO!. Following me?

 

The next hoorah for the Pound came with governor Carney’s interest rate decision. Despite a 9-0 vote within the Monetary Policy Committee of the Bank of England to keep interest rates on hold, the subsequent press conference saw traders offer the Pound considerable value. The value reflected the more hawkish tone of Governor Mark Carney, who noted that post-Brexit interest rates may have to rise faster than expected. The arch (yet supposedly non-partisan) remainer also reminded us that there could be considerable growth in the UK economy and scope to raise rates should the UK government secure an adequate deal. Given the morning’s announcements, the comment led investors to commit to further demand for Sterling as a financial services deal is thought to be a good deal: Our final YES…! Will the rally continue? Maybe.

 

October was the worst month for global equities in six years. Given the composition of global markets, this has been of particular concern for the Dollar and the role that the ever-tightening Fed has played in precipitating such losses. Following strong demand yesterday for the Dollar, driven by the forces of month end portfolio balancing, the greenback suffered tremendously today. The fall in today’s US Dollar has helped stock markets recover slightly on the day.

 

 

Discussion and Analysis by Charles Porter

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