13th March 2019
Currency traders are bracing for the most volatile week for the pound since the EU Referendum after Attorney General Geoffrey Cox dashed hopes of the prime minister’s revised deal being backed by Parliament.
The pound surged to a 22-month high versus the euro ahead of the crucial votes in the House of Commons before tanking on Mr Cox’s legal opinion on the revised deal. His warning that the risk of being trapped in the Irish backstop indefinitely “remains unchanged” sent sterling sliding 1.2pc against euro to €1.1555.
Investors rushed to grab protection from wild swings in the pound, pushing up sterling’s one-week implied volatility to its highest level since June 2016.
The implied volatility measure gauges demand for financial products to hedge against large currency fluctuations. Its surge to a post-referendum high implies that traders are bracing for big sterling moves over the next seven days.
The pound’s woes have helped the FTSE 100 push ahead of rivals yesterday afternoon. The index had been boosted by the sharp slide in sterling lifting the relative value of London-listed companies’ overseas earnings. The FTSE 100 has climbed 0.4pc, led higher by its international contingent, while the Euro Stoxx 50, which tracks eurozone blue-chips, has inched up just 0.1pc.
Meanwhile in New York, Boeing’s 6pc plunge has single-handedly dragged the Dow Jones into the red. The aircraft manufacturer has wiped 180 points off the Dow, knocking it down to a 0.4pc loss
May’s Brexit Deal Rejected
U.K. Prime Minister Theresa May’s Brexit deal was rejected once again by Parliament, throwing the country deeper into political crisis and raising the prospect that the divorce will be delayed or even reversed. May’s deal — renegotiated late on Monday night — was defeated by 391 votes to 242. That was less than the record 230-vote margin she suffered in January, but still a resounding repudiation of two years of painstaking work. With the deal all but dead, Parliament will probably vote to postpone Brexit later this week, and lawmakers — including some of May’s own Cabinet — will likely try to maneuver to force the government to rip up its Brexit plans and start again. Sterling fell for the eighth time in nine sessions.
FTSE 100 Trading Signals, Forecast and Prediction
Well that’s yet another vote out the way and yet again suggests that we are more than likely heading for a no-deal Brexit. As expected cable moved the FTSE100 yesterday and we were a bit unlucky with our short as it spiked to 7167 then dropped down to 7130. The FTSE100 has remained fairly positive overnight though, hovering around the 7140 area. I am thinking that we may get a dip and rise day today though, and the 7090 to 7104 area still looks like decent support, with S1 at 7103, and the key fib at 7091. As such if we dip down to this area then I am thinking that a long here is worth a go. Should the bears break this area then we are looking at a dip down to 7070 still – and this area should see a bounce as I have been expecting all week! If it breaks though then 6970 looks likely.
If the bulls do defend today then I am still expecting a rise towards the 7211 area. This area is the recent high and a break of this leads to 7232 which is now daily resistance. Above this then 7261 to 7276 is the next area of resistance and may well see a stutter from the bulls. Today the recriminations will start and more Brexit bull**** as to why the deal failed, who’s fault etc etc. Interesting the mention of a second referendum got a big cheer from the house during May’s speech after the result. Can you imagine – keep voting till you get the result the want.
Anyway, this week remains a tricky one to navigate but I am looking at those area mentioned above and a dip and rise today.
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