Intraday Market Thoughts

A Win-Win for Johnson & CAD Elections Postscript

by Adam Button
Oct 23, 2019 14:22

The pound gave back a chunk of gains on Tuesday after PM Boris Johnson failed to win a vote to fast-track Brexit legislation, but he's increasingly finding himself in a win-win situation. The path for the currency, however, remains more complicated. The long GBPUSD Premium Insights trade was closed moments before yesterday's votes for 135-pip gain. A new trade was posted with 2 charts. A negative outlook from Texas Instruments is weighing on microchips & techn, while Boeing continues to weigh on the DOW30. The English Premium video, focusing on indices and GBP is posted below. A post-script on the Canadian elections is added below.

Johnson is on his way to losing the battle to Brexit by October 31, but is making steady progress in the Brexit war and his personal political campaign.

GBP traders are rightfully fixated on UK political headlines at the moment. The pound jumped to 1.30 as the Brexit withdrawal bill won a healthy 329-299 majority with the help of valuable Labour votes (the first successfully passed vote Brexit withdrawal bill ever) but the gains evaporated to 1.2850 when he lost a vote 308-322 to fast-track the bill.

The debate now centers on the duration of the extension. Conservatives are threatening an election if it's anything more than a short, 10-day technical extension with no threat of anything beyond that. That has some EU leaders uneasy about getting being dragged further into playing politics in the UK.

For Johnson personally, there probably isn't a bad outcome. His Brexit deal success, along with growing public Brexit exhaustion public have boosted him in the polls. This would be a good time to fight an election. Alternatively, a short extension followed by a deal would be a minor loss on the timeline exchange for a major political achievement that could ultimately vault him even higher up the polls.

Pound bulls are viewing a Deal-Brexit to be only a matter of time. An election in the interim would add an unwanted round of uncertainty as well as disappointment with a solution within grasp but, would be a setback for the ascendant pound, not fatal blow.

Final Thoughts on the Canadian Election

The contrast with Brexit and Canadian politics was almost surreal in the past day. We're experiencing +70 pip moves on every Brexit rumor and yet Canada just experienced a significant change in government – majority to minority – and we struggle to identify any more than a 10 pip move on the vote.

We're increasingly used to seeing politics make waves in markets every day but you don't have to go too far back to a time when politics hardly mattered. Canadian election night was like a timewarp.

Canada may one day splintering towards the extremes like many other democracies but for now, Canada is holding in the center. Canada is a 'boring' country and in a strong global economy, that means it's forgotten about. But when the trouble comes, boring is good and it will be good for the loonie


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