Brexit Latest News:
- Concerns that UK Prime Minister Boris Johnson could call for a snap election have hit the British Pound.
- But before a snap general election is called, UK PM Johnson may try to get his Brexit deal – which MPs agreed with in principle last week – passed through UK parliament once more.
- Retail trader positioning suggests that the British Pound is on less certain footing than it was less than 24-hours ago.
Looking for longer-term forecasts on the British Pound? Check out the DailyFX Trading Guides.
Volatility in the British Pound is on the rise again thanks to the latest Brexit news out of the UK. After UK Prime Minister Boris Johnson begrudgingly sent (but not signed) a letter to EU officials last week requesting an extension to the October 31 Brexit deadline, there are still tensions over what form the extension should take.
Although countries like Germany and the Netherlands have come around to the idea that a three-month extension to Brexit is necessary, France has proven to be a fly in the ointment once again. After saying that another extension is “in no one’s interest,” it appears that French President Emmanuel Macron is now pushing for a short delay, perhaps only to November 15.
Seeing potential hurdles to a clean extension, UK PM Johnson has convened ministers in order to decide on calling a snap general election. The British Pound has been hit as fears have perked up that Brexit could be delayed, or yet worse, a no-deal, hard Brexit outcome could become the most likely scenario once more. As a result, we’ve seen significant swings in British Pound positioning and sentiment over the past 24-hours.
IG Client Sentiment Index: GBP/USD Rate Forecast (October 24, 2019) (Chart 1)
GBP/USD: Retail trader data shows 51.5% of traders are net-long with the ratio of traders long to short at 1.06 to 1. The number of traders net-long is 1.7% lower than yesterday and 13.1% lower from last week, while the number of traders net-short is 7.8% lower than yesterday and 16.7% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias.
IG Client Sentiment Index: GBP/JPY Rate Forecast (October 24, 2019) (Chart 2)
GBP/JPY: Retail trader data shows 44.7% of traders are net-long with the ratio of traders short to long at 1.24 to 1. The number of traders net-long is 3.9% lower than yesterday and 18.6% lower from last week, while the number of traders net-short is 1.4% higher than yesterday and 56.9% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBP/JPY-bullish contrarian trading bias.
IG Client Sentiment Index: EUR/GBP Rate Forecast (October 24, 2019) (Chart 3)
EUR/GBP: Retail trader data shows 63.6% of traders are net-long with the ratio of traders long to short at 1.74 to 1. In fact, traders have remained net-long since October 14 when EUR/GBP traded near 0.86401; price has remained unchanged since then. The number of traders net-long is 3.8% higher than yesterday and 29.4% higher from last week, while the number of traders net-short is 2.0% higher than yesterday and 6.6% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/GBP prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/GBP-bearish contrarian trading bias.
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--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail at cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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