After the almost 3 years’ shambles that Brexit has turned into, this week we saw Theresa May for the first time use the term “No Brexit” in a non-sarcastic statement. Yesterday’s Theresa May speech before the House of Commons placed the entire idea of Brexit in doubt. Among the possibilities introduced were a 2-month to 2-year postponement of Brexit, and perhaps a No Brexit. At this point it is highly unlikely that Brexit will happen at all, and the Pound reacted strongly and accordingly. If you care to listen to the entire speech, here it is.
Fundamentals matter, and we have been bearish on the pound for quite a while. Yesterday, that all changed. We exited all our short positions, and hopped on top of the Bull. Today we are up hundreds of pips on bullish Pound trades. We plan on keeping these open for the foreseeable future, too, as the Pound should revisit its post-Brexit Referendum highs provided nothing else changes. That’s a big if, however, and we’ll continue to monitor the situation closely.
We have friends in England. Quite a few are irate at Parliament for ignoring the “Will of The People”. “The People voted for Brexit, and Parliament is betraying us!”, is a common theme. Well, no, sorry. I’m a Brexit sympathizer, myself, but let’s be honest here. Only a little more than half the voters picked Leave. And voting turnout was pitifully low to begin with. So pretending that “The People” all voted Leave is somewhat naive. Obviously the voters, those who even bothered to go to the polls, were split almost right down the middle. And this is why the aftermath of that referendum has been so painful for the UK.
For starters, the party that wanted to Remain was the one who idiotically called for a vote. Why? Are there no traders in the Conservative Party in the UK? We traders don’t take unnecessary risks! We do take necessary ones, of course, but calling for a vote on something they didn’t want to see happen at all was extremely shortsighted and dangerous. Within the week, the Prime Minister had to resign, falling on his sword, figuratively. He was replaced by a person from the same party, Theresa May, who also did not agree with Brexit. And then everyone is surprised that for two years, the UK didn’t bother to iron out or negotiate a credible plan to leave the EU!
Meanwhile, the opposition, which in this case is the Labour Party, has had nothing much to offer, besides being dogged by (very real) accusations of antisemitism. Despite winning many parliamentary seats back in a special election held shortly after the Brexit vote, they’ve not managed to be convincing with any alternatives proffered. They’ve almost exclusively focused on trying to unseat Theresa May, and failed, and halfheartedly trying to sell the idea of a second referendum to vote on Brexit, yet again.
That’s a dangerous move. It sets the precedent that any time one doesn’t like the result of a referendum, then we’ll simply repeat it as many times as it takes for the right result to come in. But at the end of the day, and this is why we can’t ignore Fundamentals, it is very doubtful that Brexit is going to be happening any time soon, or even at all. That means market sentiment will remain bullish towards the Pound until something else happens to change that. Unfortunately for the UK, the damage has been done. It doesn’t matter if Brexit happens. Companies headquartered in the UK have run for the hills. The hills, in this case, being mainland Europe. London, the financial capital of the continent, can no longer claim to be that. They’re not going to come back just because Brexit was cancelled. They’ve already spent the money to relocate. Manufacturers, such as Honda, and many others with operations in the UK, have done the same. Also not going to be reopening just because.
The cost to the UK will be dreadful, and the worst thing is that it will be for nothing. There will be no Brexit. That means that the UK will not enjoy any of the hypothetical benefits of leaving the EU. But it will suffer through all the negative effects, since most of them have already happened. That clock can’t be turned back at this point. Not even with a TARDIS.
Buy the Pound. There’s still hundreds of pips per GBP pair to be had, maybe more than a thousand, in some cases. Money in your account.
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Andres Pedraza
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