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 sterling to lurch negatively, with the GBP/USD failing to break its 50-day moving average and falling to a 0.7000 level.
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.
By Peter Rosenstreich