New Prime Minister in Number 10; new 52-week lows for Pound Sterling.
The linkage between the two is the rhetoric for a no-deal Brexit. Over the weekend, the new Johnson administration, packed with hardline Brexit ministers, began a series of campaigns to prepare the country for an abrupt Brexit on October 31.
Investors and traders are spooked. The confrontational political posture is now being factored in Sterling across the board.
Against USD, the FX has slumped to 1.221 in one of the biggest downward dynamics over the past year (see Featured Chart).
Versus EUR, the rate has crashed from the 50-day moving average into one-year lows. Support at 1.100 is decisively broken.
Against the Swiss Franc, sideways support at 1.220 is being hammered through (see below).
Another new year low is noted in GBPCAD. Prices are sinking towards the major psychological level at 1.600.
Interestingly, even against the Chinese Yuan (GBPCNY), the rate is dropping towards the major support level at 8.400.
Overall, markets are now re-calculating the probabilities of a ‘Hard’ Brexit. This is the new reality. Earlier, I noted the lack of cheer for the new PM. It is clear now why this is the case. Until new pro-growth policies are announced, I assume that Sterling’s slide will continue in the near term.
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