The pound sterling has seen a week of chaos, the image of the discussions on the Brexit, chaining the falls and flights at the discretion of the twists around the exit of the Uk from the EU.
On the week, the british currency climbed 1.80% against the dollar and 1% against the euro. Friday, it was trading at around 1,3250 dollar and 1,1700 euro.
This increase illustrates the amazing confidence of the markets in an amicable divorce, despite the disarray at Westminster. She, however, makes it evil account of the extreme sensitivity of the book on the order paper of the Brexit.
In normal times, the currency reacts to changes in monetary policy or to the many economic indicators. But for the past several months, “the Brexit is clearly the main trigger,” says Friday, AFP Carlo Alberto De Casa, senior analyst for ActivTrades.
This makes the british currency a good indicator of the opinion of the investors about the terms of the Brexit – the book is worth far less than before the referendum in June 2016. When the chances of an agreement between the United Kingdom and the EU are increasing, the pound is appreciating in value, and conversely the book down when you increase the risk of “Brexit” without agreement or a long-term extension of the current haziness.
– Tuesday, clears Monday –
The past week is a summary perfect of the weight of the issues of Brexit on the book.
Monday, it is the optimism that dominates among traders, especially in the evening, when the First british minister Theresa May announced today that they have achieved the ultimate concessions of the european Union. In a few minutes, the pound gains 1% against the dollar, a figure significant to the scale of the colossal foreign exchange market.
Tuesday morning, analysts are wondering. The recent concessions will be sufficient for the agreement entered into by Ms. May with the EU to be voted on by the mp, after a first frank release in January ?
“The defeat of the british government is no longer certain for the british government, announced in a note to Lee Hardman, and Fritz Louw, analyst for MUFG. But for Neil Wilson, an analyst for Markets.com “the refusal of the book (to climb higher) betrays doubts”.
The hopes are quickly swept away. In the late morning, the legal advisor to the government deems as “legal risk” presented by the agreement “remain unchanged”. Immediately, the book picks up and erases all of its gains accumulated over the previous 24 hours. For the markets, it is now clear that a new defeat seems to Theresa May – it will be taking place the same evening.
– Pay Attention to the ‘no deal’ –
Wednesday morning, the optimism is back. Despite the absence of a new element, the book ascends gradually but surely, to a few hours a vote by mps on the “no deal”. Around 17: 00 GMT, it is up more than 1% against the dollar and euro, relative to its price on the day before.
Follows a session stormy to the Parliament, which pushed the pound to highs. At 20: 30 GMT, it reached 1,1803 euro, a level not seen since may of 2017.
Conservative mps and even ministers have challenged the voting instructions of Theresa May, by adopting an amendment that rejects the option of a release without an agreement “whatever the circumstances”. In the aftermath, Ms. May announced that she was going to submit a third time his agreement in Parliament.
Finally, on Wednesday, the british currency ended up 2% against the dollar and 1.6% against the euro, its best day since two years.
On Thursday, the Parliament decides to request the postponement of Brexit, by removing the chance of an exit without an agreement. But the book is not really reacting, because this vote was widely expected and caution is.
“In cases where we’d go to a +no deal+, the dramatic storyline and the more complicated it is for the Uk, we could see huge movements on the book”, warns Mr De Casa, according to which all eyes are now turned to the response from the EU.