Pound and Stocks drop after Brexit delay becomes inevitable

The British pound held onto early gains after PM Johnson won the first vote on the principles of his Brexit deal.  The second vote was a different story as risk aversion hit the financial markets after UK lawmakers failed to vote for Boris Johnson’s fast-track timetable, a key condition for the deal he made with the EU last week.  While the initial move saw British pound tumble below the 1.2900 handle, no-deal Brexit risks remain relatively low, and the likely outcome of a general election seems favorable for Johnson to end up with a majority. 

US stocks failed once again to reach record territory and investors hit the sell button once Brexit became impossible to be delivered by October 31st.  The market was beginning to become a little too optimistic that a Brexit deal was going to get done.  Market uncertainty is the biggest bane to the UK economy and until we go through the motions of the general election, we should see the British pound slowly grind higher. 

Gold

Gold struggled to deliver a significant rally despite the risk-off move that stemmed from the Boris Johnson’s Brexit setback.  Trade optimism remains fairly high and the prospects of Brexit getting done with a short delay will likely continue to weigh on gold prices.  Gold needs a fresh geopolitical risk event to take out the $1,500 an ounce level.  Unless earnings complete go south, we could see gold test the summer lows. 

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Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya