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Friday, 13 December 2019

Mr.Johnson won decisive majority, but the market doesn't look optimistic enough?

[EURGBP is approaching the level near Brexit referendum 2016]
The UK election yesterday resulted a big trophy for Tory and Mr.Johnson, and British pound scarcely reacted stronger before the exit polls released. While the FX market responded optimistically as concerns over the hung parliament faded away, it doesn't mean No-deal Brexit is ruled out from the plan.

On the Brexit day which is no later than 31-Jan-2020, UK actually doesn't get Brexit done, but they just start the trade talk with EU. The trade deal is expected to be agreed and ratified by Dec-2020, otherwise the consequence could be No-deal Brexit on Jan-2021 unless the extension is given.

Observing EURGBP market, GBP moved stronger yesterday but it is still weaker than the level before Brexit referendum 2016. It also implies that the market cannot be as optimistic as it was before the referendum. Perhaps, No-deal possibility is still priced in.

Ref. BBC News: Brexit: What happens now?

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