Daily Brexit update: Another sterling beating from “Robust discussions”

Theresa May insists "Further clarification and discussion” on the Brexit deal are possible.

Daily Brexit update: Another sterling beating from “Robust discussions”

Theresa May insists that "Further clarification and discussion” on the Brexit deal are possible. Unfortunately, senior EU leaders continue to state the opposite. This bout of shuttle diplomacy around the continent is going much like the others the Prime Minister conducted this year; not exceedingly well. What May describes as “robust discussions” with European Commission President Jean-Claude Juncker are even becoming an Internet meme as clips of the pair facing-off go viral. They show Juncker applying light physical restraint whilst shaking his head, then raising his palm. Sterling had another look at the week’s 20-month lows, though didn’t quite see the worst.

How this affects our Brexit Top 10 markets:

GBP/USD: The last few hours have been better, and $1.2554 is now established as nearby support. Still, buyers are up against bullish U.S. economic releases that boost the U.S. dollar. The hourly view shows an upswing after a spike down to $1.2527, the worst of the day, whilst the uptick runs into offers at $1.257s. This echoes earlier price action. Failure here brings values closer to $1.2510 back in, the scene of much action around Tuesday’s abortive vote and near critical lift-off lows from April 2017.

Technical analysis chart: sterling/U.S. dollar – hourly intervals [14/12/2018 16:48:05]

Source: Refinitiv/City Index

GBP/JPY: One of the better-performing sterling pairs is also giving up the ghost after a two-session run. Its fall of more than a yen on Friday is the third of such magnitude this month, re-piercing the ¥142.75 resistance turned support. A close below sets the stage for a poor start next week. 

EUR/USD: Sterling-unfettered euro is faring better than the market against the pound. It was heading back to the 38.2% retracement ($1.304) though more broadly, underlying weakness from cautious ECB signals and missed PMI expectations earlier, is clear. Visible consolidation around the Fib mentioned above suggests the region will turn out to be top of the late-morning/afternoon of range.

EUR/GBP: The pair is also ranging, and has also risen out of lows, hence pointing to firm underlying euro sentiment if the dollar is taken out of the equation. But it failed in the afternoon well short of a late-morning spike to .9006. Identical spike lows at .8956 in Asia and Europe are setting direction again.

UK 100: Despite rapid consolidation of the week’s solid start for shares, key markets are avoiding an outright decline compared to last Friday. The FTSE set a 0.5% loss for the day but is up 1.3% for the week. It’s no Santa rally but it could be worse despite the benchmark’s 10% drop this year.

Germany 30: The DAX is worse off in 2018, down almost 16%, but up more than 2% this week as China-U.S. trade discussions begin to look credible. It’s closing 0.5% lower though, as weak data from both its own region and its giant trading partner renew the drag on global equities.

Lloyds: Lloyds’ 1% Friday fall rounds off a third straight weekly loss in a 23% fall for 2018 to date. The lender’s final year as the leading domestic bank in Europe’s second-largest economy looks like a harbinger of 2019.

Barclays: Barclays has barely fared better this year, losing 22%. An intraday recovery stateside could bring a better start to next week due to the group’s Wall Street exposure. No sign of a re-think among U.S. investors yet though with the Dow losing 1.9% and SPX down 1.6%.

Shell: Oil turned out to be a leading edge of Friday’s sell-off. Just now, Brent was losing 1.5%, back down from a brief afternoon respite. Yet Shell shrugs that off with a rise of  0.06%. Despite negative news flow from Nigeria and Singapore and worrying prices, earnings expectations remain robust, pointing to a 23.5% jump in Shell’s Q4 EPS to $1.49.

BP: No escape from the global stock market chill for No. 2 oil major as it closes 0.3% lower.


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.