Brexit Day 5 The uncertainty continues but the bounce back also continues. UK PM Cameron outlined the choices the country will face in negotiations to establish a new relationship with the EU. He said, during a comparatively un-tempestuous prime ministers question time session in parliament, that his successor will have to examine the different ‘models’ to see what works best, mentioning as examples the Canadian model, the Swiss model and the Norwegian model. All of these would constitute a marked deterioration in the UK’s current trading terms with the EU as a fully paid up member, and in the case of the Swiss and Norwegian examples would involve an open-border commitment. Many of those who had been in the Leave campaign, meanwhile, are hoping that the EU itself, sensing an existential threat, will change its attitude toward the migration issue and allow the UK access to the single market while controlling its borders. The idea is that there will be free movement of labour as opposed to free movement of people, with a reformed Europe comprised of individual but globalised economies. Some right-wing Leavers have been promoting Singapore as an example model.
Cable made up some ground overnight, topping at 1.3454, though so far unable to best Monday’s 1.3485 peak. EUR-USD traded over 1.1100, though continues to find sellers over the level. USD-JPY gains have stalled despite the improved risk backdrop, while USD-CAD has traded under 1.3000 on higher oil prices. Brexit uncertainty remains a market driver, though for now at least, unwinding of the sharp risk-off movements which began last week continue.
Global equities moved higher for the second day, and U.S. futures indicate a higher Wall Street open today. This meant that Target 2 at 2042 on the USA500 was achieved and a further advance to 2067 cannot be ruled out, however, this position is now closed.
I explained the approach to taking this trade during yesterday’s live analysis webinar together with the importance of risk management and always doing what is probable.
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