The Market Sentimentalist: Ready, Steady, Brexit

Not Just Scotland: McGuinness, Brexit and the Dismantling of the United Kingdom

Brexit: Article 50 Triggered. A Legal Update from Dechert's International Trade and EU Law Team

Amareos

Ryan Shea

Thematic (Sector/Industry)

United kingdom / Thematic (Sector/Industry)

One of the highlights of this week’s UK Conservative Party conference (there were plenty of lowlights, especially on the topic of immigration) was PM May’s announcement that Article 50 will be triggered by March next year; a legislative prerequisite for formal negotiations on the UK leaving the EU to begin.GBP slumped amid concern that the two-year timetable for these negotiations to be concluded will not be sufficient time to agree new bilateral trading arrangements (precedent suggests these negotiations take several, if not more, years) meaning a growth-damaging “hard”, as opposed to “soft”, Brexit.With the UK currency having already devalued by 10% in trade-weighted terms since the vote (a magnitude in line with the UK Treasury’s pre-vote analysis of the impact of Brexit) some market participants may be tempted to play the contrarian game and position for a rebound.After all, nothing grabs the attention of value investors like a 30-year price low (as is the case with GBP/USD), particularly when UK economic data releases are still surprising on the upside.In early August UK crowd-sourced sentiment indicators (correctly) flagged a short squeeze opportunity in GBP. So what are they implying now for the future direction of the UK currency?

One of the highlights of this week’s UK Conservative Party conference (there were plenty of lowlights, especially on the topic of immigration) was PM May’s announcement that Article 50 will be triggered by March next year; a legislative prerequisite for formal negotiations on the UK leaving the EU to begin.GBP slumped amid concern that the two-year timetable for these negotiations to be concluded will not be sufficient time to agree new bilateral trading arrangements (precedent suggests these negotiations take several, if not more, years) meaning a growth-damaging “hard”, as opposed to “soft”, Brexit.With the UK currency having already devalued by 10% in trade-weighted terms since the vote (a magnitude in line with the UK Treasury’s pre-vote analysis of the impact of Brexit) some market participants may be tempted to play the contrarian game and position for a rebound.After all, nothing grabs the attention of value investors like a 30-year price low (as is the case with GBP/USD), particularly when UK economic data releases are still surprising on the upside.In early August UK crowd-sourced sentiment indicators (correctly) flagged a short squeeze opportunity in GBP. So what are they implying now for the future direction of the UK currency? 

Fear And Loathing In London