Brexit

Back in 2016, a majority of British voters supported leaving the European Union (EU). This begins the process of United Kingdom's (UK) withdrawal from the EU, or popularly known as Brexit. UK has been a member of the EU since its formation. With Brexit happening, it meant that UK has to prepare for major changes as it currently shares a number of legislations and services with the EU, such as financial, trade and immigration. Negotiations with the EU have been taking place since the conclusion of the votes with the intention to minimize any economic and social impact to UK's after Brexit.

The IMF has warned that regardless of a "hard" or "soft" Brexit (referring to the severity of Brexit's impact), the UK's economy will take a financial hit. However, UK policy makers are doing their best to avoid a "hard" Brexit which would be detrimental to the UK economy. If a "hard" Brexit were to happen, UK will be expected to give up some of the key access to the EU's single market in exchange for full control over its borders. In short, a "hard" Brexit will result in the loss of four fundamental freedoms for UK: the free movement of services, goods, capital and people.

“With GBP expecting to be volatile, there will be ample trading opportunities for investors and speculators.”

During the initial phase of the negotiations, policy makers were unable to see eye to eye and discussions often ended up in a deadlock. This has caused the value of GBP to be on a downtrend since 2016. However, in September 2018, a breakthrough in the negotiations between UK and EU was achieved when EU's chief Brexit negotiator Michel Barnier took a step back and decided to take a less rigid stance on immigration policies. Immigration was one of the key disputes that neither side was willing to give in during the initial stages of negotiations. With EU willing to relax its immigration terms, markets take it as a positive step forward, explaining the recent recovery in GBP. This has rekindled investors' buying interest in GBP, which has fallen almost 12% since the beginning of 2018.

Despite the positive breakthrough, it is not all smooth sailing for UK yet. Disagreements within UK's government started, with some "rebel" lawmakers in Prime Minister Theresa May's Conservative Party threatening to foil her Brexit plans. Investors who are interested to buy GBP must be prepared for its high volatility, which is expected to last until November, the new deadline for a possible deal (Refer to the table below for key Brexit events).

With GBP expecting to be volatile, there will be ample trading opportunities for investors and speculators. Traders who would like to explore some currency exposure can consider trying out Phillip Futures' MT5 platform. The platform offers free commission on trades and the tight spreads. The very intuitive platform allows users to start small by trading micro lots, with a margin outlay of approximately US$30. Clients who are new to forex trading are welcomed to attend 1-to-1 coaching sessions with our experienced consultants, to equip themselves with product knowledge before placing their first trade.

Key Brexit Events:

Date Events
20 Sep 2018 EU Summit in Salzburg
30 Sep - 3 Oct 2018 UK Conservative party conference
18 Oct - 19 Oct 2018 EU summit in Brussels
Nov 2018 The new deadline for a deal. Possible one-off summit
29 Mar 2019 UK leaves EU; Transition period due to start
Jan 2021 Transition ends; UK due to start trading with EU on terms of new trade deal

For more information, please visit https://www.phillipfutures.com.sg or call +65 6538 0500.

 

About Phillip Futures

Phillip Futures was established in 1983 as a member of PhillipCapital Group. We are one of the founding clearing members of Singapore Exchange Derivatives Trading (SGX-DT) and hold the Capital Markets Services Licence issued by the Monetary Authority of Singapore (MAS). Phillip Futures has since grown to become one of the region's top brokerages for the trading of global futures, foreign exchange, energy, metals and commodity futures. Through our PhillipCapital Group network companies, we have enhanced direct-hub access into exchanges around the world, including BMD, CME, CBOT, NYMEX, COMEX, HKEx, ICDX, JPX, SGX, SMX, TFEX, offering you a large selection of trading products to meet your investment needs.

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