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 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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