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Brexit could sent the GBP down 900 PIPS!


Guest ben_wilson-powell

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Guest ben_wilson-powell

Just wanting thoughts on this gesture I've been advised of... based on an article... https://www.poundsterlinglive.com/gbp-live-today

"Please check the chart below, as you can see when the UK decided to leave the EU the GBPJPY dropped over 3000 PIPS! The market has now pushed up to an area just lower than the referendum. This means if the UK parliament does not back Theresa May’s deal, which is highly likely. The GBPJPY could drop to post referendum levels, or even lower!" 

GBP.png

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Hi @ben_wilson-powell,  I've written before that just such a scenario is very possible, the rationale being that the GBP low post referendum was calculated in advance by large speculators who were assuming Brexit meant Brexit and the rallies off the lows were a response to the idea of a negotiated separation. The realisation of a no-deal Brexit could mean a return to the original supposition though much has occurred since the referendum such as the idea that WTO trade rules could be applied that may lessen the impact of a no-deal Brexit decision.

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The danger of looking at charts @ben_wilson-powell is looking only at a segment that fits ones bias.  Now look at the long term charts (see 2 X monthly versions below).  What you will see clearly (to me at least) is that GBP has been in a Bear market for decades (you will see similar on GBPUSD).  Mind you almost every currency has this profile against the Yen, a well documented economic challenge for Japan that led to Abeonomics (which is mostly just the same thing that all the central bankers are doing).

There may very well be further drops (GBPJPY), whether triggered by Brexit noise or not.  However the underlying issue for the UK economic is poor trade balance, and has been for decades.  It is this very issue that pro Brexiters seek to address by leaving the EU and making non protectionist trade deals with the rest of the world (i.e. free trade deals), in particular leveraging historic common-wealth relationships (a unique position for the UK under exploited as a result of being in the EU).  I am fairly convinced that the Brexiters will not go for the Checkers deal and that will be the end of May.  Such a situation (in particular the idea that Corbyn might actually become PW - an out and out non establishment hard core socialist!) would certainly lead to volatility in both the GBP and EUR (I expect it will all turn out worse for the EU so I'm tipping EURGBP to plummet in due course).

In terms of GBPUSD (see other thread) the USD will rally hard on any sign of a stocks (well economic really) meltdown but that will impact every pair and has nothing to do with Brexit.

In terms of GBPJPY (and also checkout USDJPY charts). I think the Yen strength has bottomed out and, perhaps after a little further retracement volatility, will begin to soften and then Abe will get what he wanted, a devalued Yen, again nothing to do with Brexit.

Everyone seems obsessed with this Brexit topic and I am sure it will produce some short term volatility but it will soon be overtaken as an issue by much bigger global macro economic factors.  It is a much bigger issue for the EU than the UK, which you would find it hard to credit given the MSM coverage.  A no deal for the EU would be catastrophic.  It would embolden struggling countries like Greece and Italy to front up to Brussels because they will be seen as weak, because they are.  Those indiviudal countries issues have not been addressed and neither have the EU banks addressed the credit crunch fiasco, so that is all to come.  Add to that a Trump hardball trade war and Boom!  There goes the Euro...  The UK will be very happy in hindsight to never have joined the Euro and to be out of the EU.

GBPJPY-2-months_301118.thumb.png.9be02f50d87e011f4f366242805ac516.pngGBPJPY-Monthly_301118.thumb.png.6b38f367ff8841ad62ada23da7f906ed.png

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