Brexit Moment of Truth Trading Analysis – 14th October 2020

Today’s Market Outlook 

Stock markets were mixed on Wednesday, as strong corporate earnings and new devices from Apple failed to distract from the worsening picture on COVID-19 and US stimulus talks. 

European stock markets mostly opened near flat on Wednesday morning, following a global slump for equities on Tuesday. 

Markets around the world had fallen on Tuesday after two COVID-19 vaccine trials were paused. Sentiment was also hit by a lack of progress in US stimulus talks and rising COVID-19 cases around the world, which has led to increased restrictions across Europe. 

Michael Hewson, chief market analyst at CMC Markets, said on Wednesday morning there was a “sombre mood” among investors. 

The DAX (^GDAXI) was up 0.1% in Frankfurt and the CAC 40 (^FCHI) was flat in Paris after an hour of trade. 

The FTSE 100 (^FTSE) was up 0.4% in London. The index was boosted by pressure on the pound. Around 70% of company earnings on the index are derived in dollars, so a weak pound makes their share prices look more attractive. 

Sterling lost ground against the dollar and the euro on Wednesday, as investor jitters grew ahead of UK prime minister Boris Johnson’s deadline for progress in Brexit trade talks. 

Johnson has previously said this Thursday (15 October) marks the latest date for an agreement on a UK-EU trade deal, for it to be signed off and put into place by the start of next year. EU leaders are due to meet in Brussels on Thursday. 

The UK government has threatened to walk away from talks if no agreement is reached, paving the way for Britain to crash out of the EU’s single market and customs union without a deal on 31 December. Economists expect short-term disruption and long-term damage to the UK economy if Britain severs its close trade ties with the bloc. 

The Prime Minister is due to hold talks with European Commission president Ursula von der Leyen on Wednesday, discussing the state of negotiations. 

A Downing Street spokesman told PA Johnson still believed an agreement could be reached, but failure to do so should hold “no fear.” 

Meanwhile Reuters is reporting EU officials have drawn up a draft summit decision for Thursday’s meeting, saying progress is “still not sufficient” to strike a deal. It says EU leaders are expected to agree to ramp up planning for a no-deal outcome when Britain’s current transition period expires. 

Issues including alignment on standards, fishing access and how disputes are resolved remain key obstacles to a deal. 

Sterling was down 0.2% against the dollar (GBPUSD=X) in early trading on Wednesday, trading just above $1.29. It also lost 0.2% against the euro (GBPEUR=X), with the pound selling for just under Є1.10. 

Today’s High Impact Events

The times below are GMT+3. 

  • 14.00 ECB Mersch Speech 

Potential instruments to Trade: EUR Crosses.   

  • 15.00 – ECB Lane Speech 

Potential instruments to Trade: EUR Crosses.   

  • 15.30 – CPI & Core CPI m/m (U.S.) 

Potential instruments to Trade: USD Crosses.  

  • 16.00 – Fed Clarida Speech  

Potential instruments to Trade: USD Crosses.  

  • 16.00 – BOE Haldane Speech  

Potential instruments to Trade: GBP Crosses.  

  • 17.30 – BOC Lane Speech  

Potential instruments to Trade: CAD Crosses.  

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