Sell sterling!
By Peter Rosenstreich
Brexit pain and a cyclical downturn are weighing on the British pound. Markets will react to the latest proposals for a border between the Republic and Northern Ireland. Watch for GBP/USD failing to break 1.4251 high: a bearish extension to 1.3712 support can be expected.
A one-year clock is on the field for Brexit, highlighting the UK’s weakness. Europe has a massive internal market that companies can depend on for growth. The UK by contrast is fragmenting within itself, specifically in Northern Ireland and Scotland, and needs exports to grow. If a EU-UK trade war breaks, the UK is in much less desirable spot then Europe. More broadly, worries of a trade war will put defensive stocks in demand. Cyclical and tech driven stocks will be exposed. Fair commodity prices depend on free trade: endangering this artificially tightens supply and drives up prices.