If one thing characterizes the Brexit saga right off the gate more than 3 years ago is the defiance of all odds. What UK PM Boris Johnson has been able to pull off by sealing a new improved deal, even if it may not satisfy all parties, is noteworthy and borderline miraculous. Now, the DUP and SNP not being on board makes the arithmetics a near impossible endeavor for the deal to go through the extraordinary sitting of the UK Parliament this Saturday evening. At this stage, if one is to maintain exposure in GBP over the weekend, do ask yourself, do you believe in a miracle and the ongoing defiance of odds in the form of the deal getting the green light from the UK Parliament? If so, long GBP exposure sure can pay off big bucks, while on the flip side, if one can’t conceive such outcome, the GBP may be set to suffer from here on out. Either way, the important point to make is that holding exposure in the GBP over the weekend will carry extraordinary risks of ample gaps at the open of markets in Asia next Monday as interbank dealings will font-run the best quotes to enter before retailers have a chance to transact in the Pound. That’s why in most legit brokers that look to safeguard the interest of its clients, including of course Global Prime, GBP FX pairs leverage is likely to be reduced, in our case 1:33 (3% margin requirement) over the weekend in anticipation of increased volatility surrounding the Brexit process. Shifting gears, the free-fall in the US Dollar continues to be a hot thematic too, as the world’s reserve currency falls to the lowest in 2 months at an index level. The increased odds of a Fed rate cut before year-end + hopes of Brexit are the main culprits. The Japanese Yen is another unloved currency as risk on picks up. The Euro and the Swissy both found enough demand to stay underpinned in the grand scheme of things, although high-beta currencies (AUD, NZD, CAD) have received the most attention in terms of demand flows, as the market keeps acting as if what’s been achieved on Brexit over the last few weeks is meritorious enough to be long risk, independent of the outcome in the UK parliament, which would still most likely guarantee a Brexit deadline extension until next year. The Aussie’s extra boost of demand can also be explained due to the better-than-expected jobs report on Thursday, which allows room for the RBA to keep the powder dry in rates short-term.
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