Will Parliament Back The Brexit Deal?

Okay, so a very good morning to you. It is Friday the 18th of October. I hope everyone is doing good and ready for the session ahead, and certainly still a very much a Brexit focus given the roller coaster price activity we had yesterday. Obviously particularly interesting having had a deal brokered between Boris Johnson, his team, and the EU, seeing a significant rally in the pound, only then to come crashing back down a few hours later. Um, actually, let's just jump straight to the pound and have a look where we are at the moment against the dollar in cable. And that was the, the kind of extremity of the price movement we had yesterday. So when the European morning started, we started to get some then quite early signals that perhaps a deal was going to get struck. And then when that started to get— come through and get confirmation officially from various different journalists and, and the spokespeople related to the event, we saw a really aggressive move to the upside, got up to about 130. Um, that kind of area and the way of which, you know, this kind of price action has been responding, definitely in terms of targets when you see these bigger moves, uh, very technical in terms of where they've been responding on the areas of consolidation, but then also targets on the ascent when we have moved higher. And I got up to around that 130— looking on a daily chart, uh, 14, 15 kind of level does start to encapsulate a little bit of the price activity on the, the bottom end of the range through the, uh, the back end of Q1, Q2 of this year, uh, before just pulling back and settling now where we are at the moment, just below the 129 handle. So Net-net, I mean, it's been such a strong recovery for the pound. Of course, I mean, if we put this on a 90-minute chart, you know, where we were to where we are right now, having traded really at the 122 handle, having then tested and 130, and now sitting at the 129, which is just sub its pivot at the moment. So all of this, really, my interpretation, to make it most simple, is that this is not— and again, it's not that a deal is going to get done and Brexit solved and we're on the way now. This is more about, for me, the elimination of no deal getting priced out of the market. And the interesting thing here Sam and I were looking at was that if you think about when Theresa May left and then the market had this distinct repricing in of the increased risk of a no deal, because even though there were what, 5 candidates put forward for the leadership of the Conservative Party, even from before the televised debates begun, everyone knew Boris Johnson was going to win. So the whole thing was just a bit of a waste of time, quite frankly. And that meant that Boris Johnson, being of the more extreme approach of do or die, delivering no deal by the deadline, meant that the market kind of repriced after Theresa left from about a 1 30, 131 type level, all the way down to where we, where we hit, which was a multi-decade low, momentarily getting below the post-initial EU referendum low of 120 sterling against the dollar. But what's been happening here, and definitely what has happened in the last week and a half or so, is that, hey, in the middle of September— well, if I just highlight it here 2 real distinct phases here fundamentally. One is when we got to this period of the middle of December, that was when Parliament, remember, managed to pass through the Benn Bill, which changed UK legislation, meaning that really the prospect of Boris Johnson facilitating a no deal is really not a credible threat. Now that hasn't stopped, we know, Boris saying that, because the technicalities of the law is very complicated. And, you know, the people in the public, I would absolutely understand that, you know, the nuances of UK legislation is just too much of an undertaking and really, quite frankly, uninteresting. And so Boris can continue the kind of message and tone, if you like. So one point though is that as soon as that legislation came in, well, basically for me, the no-deal probability dropped substantially. Substantially. And that's not just me, that's what markets are thinking. You know, the pound started to rally already at that point when confirmation of that law got its royal assent. Then we had a period, an episode of a bit of a pullback, but then came this, you know, what we've had here, which is this phenomenal rally really. And interestingly, we've come all the way back up to pretty much when Theresa May left. So if anything, this area of price movement that we've had, which is, you know, no small thing. We're talking about the best part of a 10-point range, but we're back to exactly where we were. So for me, this isn't, you know, this is more of a case of no deal now is eliminated because, you know, what happens now on Saturday is if Parliament back his deal, then we push on and then we go into this transition period to the end of 2020. And then the likelihood is, is this will be a multi-year discussion about its implementation. Or he asks for an extension, we kick the can down the road. So it's either delay or deal, and definitely that's been the message as well, which Boris is trying to push certainly now to, to up the ante, to put the pressure on Parliament. Because if Parliament blocks this, you know, I think Boris Johnson has got an awesome hand to play now with the British public. Because, you know, if I was, you know, gearing up for an election, if I was thinking, do you know what, and then we're going to look at it, the parliamentary arithmetic at the moment, it's looking, I would say, on the balance unlikely his deal will pass through Parliament. Now if that is the case, and I think that Boris knows this, I would be absolutely talking up what's going on at the moment. And we saw this yesterday. This was one of the tweets that I did, and I was talking to a few of the guys here about this. Boris yesterday, kind of late morning, he did a string of tweets, and I thought it was just so incredibly telling for me of what his agenda is, or his target and objective, because it was almost like I could have taken Donald Trump's tweets and overlaid an algorithm and just pumped out another tweet, but just stuck Boris Johnson's profile over it. Now that's because everything he was talking about, for me, was nothing really to do about what the details and Brexit and so on. It was all to do with gearing up for a general election, because I think he knows this deal isn't going to go through. So what's going to be the strongest way to leverage the situation? Well, as he delivered with parliamentary officials last night, when he said to them 'Look, it's either deal or we have no deal. We cannot delay again.' So again, heaping the pressure. And his tweets, I mean, this was just, this, this was just a couple of words that came out of two tweets that he delivered. 'Take back control,' he said, he said in two tweets five times. Then he said NHS, we've got to tackle violent crime, we've got to think about the environment. I I mean, give me a break. Think about the environment. I mean, but this is it. I mean, this is why I love tracking this stuff, is because this is what I'm trying to do when I'm, when I'm thinking about what's the political narrative and where do they want to go and what could the potential outcome be. To me, this tells me this is a government pretty sure that the deal will not go through. And so therefore they're looking to now think several steps down the line about cultivating sentiment around more support into a general election. Uh, there's— to me, that's just absolutely as brazen as it comes with the type of language that they were adopting and the hashtags and so on. So yeah, it's going to be interesting. And obviously Saturday is the day because for really the first time in well, many, many years, and only a few times in history, recent modern history in fact, parliamentary members are going to sit and have a vote on a Saturday. God forbid they'd need to work at the weekend, of course. But looking at here, this is the current composition of Parliament. Now the FT always do this really excellent look at what the current numbers are and what the current feeling is between the people they've been talking to, what MPs have been saying. They have this quite good, neat political model that they calculate the potential numbers. So I'm going to run through a few things and I'll keep this graphic visible. So the FT suggests that unless the Prime Minister can persuade the DUP to drop its opposition, obviously something we saw yesterday, or persuade several Labour MPs or independent parliamentarians to support the deal, Mr. Johnson will struggle to win a House of Commons majority. So this we know, you know, securing the deal with Brussels is one part, getting it through Parliament a whole different ball game. Again, à la what we saw with Theresa May on multiple occasions. Now the FT estimates on a top level there are 321 MPs who could vote against the deal, with 318 supporting it. Now in terms of the breakdown, importantly Out of the 287 Tory MPs— so if you were looking at here, Conservatives at the bottom, you've got the Blues, but then you've also got the hardline Eurosceptic Conservatives, or the Spartans as they are self-entitled. So out of the 287 Tory MPs, nearly all are expected to back the deal, and that importantly does include that Eurosceptic group of Conservatives, the Spartans. That kind of lead figure there. Now that Rees-Mogg has kind of morphed into the cabinet and what has happened now is Steve Barker has been the main guy to monitor in terms of the overall spokesman that represents that group of people. And he's been very warm to backing the prime minister. Again, the thought being that, look, if we don't take this deal, perhaps there could be never a deal. And so better to just go with it now in that respect. So that could be good for Boris in terms of accumulating numbers. One thing that the Tory— what was said by one of the Tory MPs was that over the next 40 hours, I quote, one of them said, "There's going to be some medieval whipping going on." I thought, Christ, if I said that outside of anyone talking about politics, just in normal conversation in the pub and you heard me saying, "There's going to be some medieval whipping going on this weekend." Yeah, you might think other things, of course, but the point being is that that phrase is very important. The whipping process is absolutely key. These are the people that really, almost in a less confrontational way, force these MPs to back the government. This is a very normal process with British politics. Now, why this is important is because Mr. Johnson, the PM, needs to win over 23 independent Conservatives. Now, they're independent because former Tory MPs had their party whip removed, and so basically they're ostracized by their own party. And there's at least 3 of those that are very unlikely— that's unlikely to back the government, that being Dominic Grieve Gato Beb and Justin Greening. And so those three you can discount, even though they are part of that political party. The majority though are expected to support the agreement. So some of the numbers I've seen this morning could be as high as 15 of those independent Conservatives. Now, without the DUP though, importantly, the Prime Minister's efforts are going to be partly focused on how many other independent MPs he can capture. And now a lot of these The predominant amount are mainly former Labour parliamentarians that could be persuaded to back his deal. Again, the idea that they've been dissatisfied with the approach of Jeremy Corbyn, but also likewise, Boris does have a deal. And so if you wanted to deliver as per your constituency's wish, which may have been heavily leaning to vote to leave, and that might still be the case, then ultimately do you want to vote with the government to just get this deal done, you know, get Brexit going in that sense. Obviously, National Party, the Scottish National Party, 35 MPs, the Lib Dems, 19, they're all expected to go against the deal. The Welsh Party's 4 MPs, the single Green vote, all set to reject it. We know this, of course. The balance of power, you know, one thing that definitely shifts this is the DUP, because obviously they represent 10, and that would make life incredibly more easier for Boris to get something. But at the moment, we know what they've said. Latest comments this morning from one of their, um, well, the, the party spokesman, Sammy Wilson, uh, he quoted this morning, I will give you an absolute assurance that there will not be voting for this deal when it comes before the House of Commons. Why should we? And I also saw a tweet, a journalist commenting from Dodds, Nigel Dodds, saying basically he's going to be talking to other Conservative members convincing them that they should not vote for the government's deal. So all in all, there's a few other things I can share with you later, but my feelings here is that the deal is not going to pass. Which means then that the government spokesperson has already said a few days ago that Boris will abide by the Benn Law, which means that he'll have to write a letter then to Brussels at the end of Saturday if this meeting does indeed— or the vote, yes, tomorrow— conclude with a vote against the government's deal. And then that means essentially the whole thing rolls over. But for me, that is the beginning of the next phase of where we're at at the moment, which is then what are going to have to be the dominoes to fall in order to get to the point of a general election, which I still at this point see happening. Timing is obviously key as to try and ascertain when that might be, but I still think that the end medium-term outcome here is a general election. And I do think that Boris, uh, has the ability to come out in a very favorable position, all things being equal, as it stands today, given the way he's positioned himself. As I said, the tone of the tweets he was doing yesterday. Forget the tweets, just go and check out the comments that people were saying on his tweets. I mean, I was saying to Sam, one guy was comparing Boris Johnson to Winston Churchill. That's how much love there is at the moment for Boris following this simplistic message of just delivering Brexit, which I think is a stroke of genius by Cummings It worked in 2016, and I think there is absolutely even more potential for it to be even more powerful this time around if there were a general election. So I think it's all going as, you know, there's been a few bumps obviously in the road, but the way of which those strategists have been planning. Right, enough Brexit, let's move on, let's talk about something else. Um, Let's talk about China. There's some, some Chinese data overnight. And one thing I just wanted to touch upon, we talk about the pound and this kind of obsession with Brexit at the moment. There is obviously a lot of other things going on. I mean, this morning the market sentiment is pretty flat. I mean, overall, the economic calendar is pretty bare today apart from a whole slew of speakers speaking predominantly from this IMF event. But everything's pretty flat on a macro top level. Obviously, we had this partial trade deal between US and China this time last week. But interestingly, you know, if you kind of remove yourself out of that, that story, think about what we've had this week. We've had US retail sales the worst since February. We had industrial production in the US decline sharply yesterday for the month of September. We've had Chinese GDP come out overnight, weakest growth in 27.5 years, 6%, 0.1 weaker than expected. We've had the German government come out yesterday, revised their economic growth forecast from next year to 1% from 1.5%. You know, we are not sure at the moment, you know, removing yourself out a lot of these kind of short-term episodes of volatility that we're seeing. The bigger picture here is this economy, the global economy, is continuing to weaken at this point. Now, we know the Fed are going to cut in October. But, you know, what's interesting here is that it almost feels like we are continuing to just grind lower at the moment. And it doesn't— it feels like this is going largely a little bit unnoticed because the distractions that are coming elsewhere. But I think the Fed is actually going to be particularly interesting at the end of the month, not just because we believe that they're going to cut interest rates again, but I definitely want to get a bit more of a feel for their assessment about what do they feel about these current developments I've just said. What do they think about the forward-looking future? I mean, there are, as I said, a number of Fed speakers speaking today. And, and while I'm on that topic, let me just bring it across so you can just see what I'm talking about. So here they are. You've got Fed's Kaplan, Fed's George, Fed's Kashkari, Clarida, You've got Fed officials debating the outlook for the crude market. You got Fed's Kaplan again later on in the evening. So yeah, lots of Fed speak. I am definitely interested in that. But, you know, not just the Fed, of course, all the other countries as well seemingly will have to turn to a more dovish stance, it was seen, if we continue in this fashion. So it's definitely almost, you know, without the distraction of some of the things like Brexit and the trade war, the material weakness in the global economy still continues to be quite evident. One thing to be aware of though, the Chinese data— investment growth did weak— it was weaker than expected, and that was kind of underlying then the weakness in growth. But industrial production did accelerate in September, and retail sales was relatively steady. So importantly, with monitoring this Chinese data going forward, are we getting to this point point of bottoming out is going to be quite key going forward. And partially, you know, hence the reason why, you know, obviously the US have got their own domestic issues to, to manage— the pressure on the farming industry to cut that agricultural deal on upfront purchasing of their goods from China, but also to just keep that momentum behind the placement of the stock market and the level of unemployment for Trump. But then from China, of course, they too need to be sure that they can counteract the fact that Q3 GDP growth is the weakest in almost 3 decades at the moment. So, you know, they've got much also at risk at this point in time. Okay, gonna quickly look at earnings. Just some other things to look out for today. You do have before the open Coca-Cola, American Express, and Schlumberger. There are other companies, but I'd say those are the 3 biggies to have a look out for. Um, if I quickly jump over to my earnings calendar here, I'll give you a snapshot so you've got all the numbers. If it's a bit small, I'll put it in the chat room. Um, timings-wise, you've got Coca-Cola 11:55, Schlumberger is at 12, Amex is at 12:30. In terms of EPS, Coke expected $0.62, Amex $2.03, um, and Schlumberger is better at $0.35 earnings per chevre. On the calendar then, as I said, very quiet now in terms of data. In fact, there is really nothing coming out today. So all the more reason why the market will probably draw attention from the speaker slate, the Brexit developments, because don't forget the EU Council summit is in day 2, so they are meeting entirely throughout the day. I guess thinking out of the box, Europe either play hardball and they start saying actually there is no extension, so you have to get this deal done now, Parliament. So they could do the pressure that way, or the alternative could be they come back, you know, what if they say just to give Boris another little help, you know, a little bit of help to get it over the line, another type or form of concession— I see that's highly unlikely— that could help then appease some of these other members that this truly is a deal worth voting before, but I think that's, that's not going to be the case. So definitely be aware, a lot of people speaking. These are all though in the afternoon. The Council Summit is going on throughout the day, but the IMF meeting is happening in the States. That's going to be hence the reason why most of these speakers are scheduled London time into the afternoon. All right, that's it from me. Final thing I want to say If you go on our YouTube channel, I was looking at our YouTube channel the other day on the analytics, and I do know that a lot of the people, at least a third, who watch these briefings are not subscribed to our channel. So if I can ask you to subscribe to the channel, that would be great. And one thing to reiterate is that, you know, take one of the videos here. People ask me questions, I will always reply to them. and so on. So that's what we're here to do. So feel free if you ever have any questions just to put them on the videos. If you haven't seen it, last week, this time last week, I did a really excellent video, um, or like an interview. So it's not me talking about markets, it's me talking to Piers, our head of trading, and it was all about lessons he learned from his biggest loss. I've had a lot of good feedback on that video. People found it incredibly useful. So if you do get— it's only 20 minutes over the weekend, definitely worth a watch. All right, that's it. Let me hand you over to Sam and have a good session and a great weekend. Thanks, guys.

Hi guys, sorry, let's clear my throat there. We'll have a quick look over to begin with, I guess, with the pound. You can see some levels here marked up on the on the old daily chart and up to test— let me just remove that rectangle there— you can see some of the levels we had back in May before we broke down. Hit pretty much to the tick. Of course, predicting exactly where we were going to stop yesterday would have been pretty tricky. Um, however, let's have a look more at today's price action. We're just having a go at trying to get above the pivot, 129 in the mix there as well. You've also got the higher that we had back on Wednesday. I quite like the look here of, uh, this trend. Let me just get it on the market as it comes through. Yeah, something like this. And it— while it might actually start from the low of the 14th, you can see just over the last few trading days, of course, these lows are getting higher. We're getting squeezed to the top. Yes, the fundamentals are at play, but we haven't had a break below it. So if we were heading into the weekend, you know, do people want to stay long over the weekend, especially if this idea of this deal not going to be passed through Parliament? Then we've got to, you would say, come back lower. And then obviously you've got some really key areas of support to be aware of from each day as well. And obviously the breakthrough that on the 11th, so this time last week as well. So some key levels to the downside that I would be keeping an eye on. I don't personally think it's really worth the risk of holding a new trade over the weekend. Obviously, if you're heavily long, um, de-risking I think would be the right thing to do. Uh, just having a look as well to the upside, you can see if we can get above the, the high from, uh, Thursday, Wednesday as well. They're just the levels from yesterday evening, and then up towards 1.30 again could be in play. The euro yesterday, uh, helping its move higher thanks to the idea that this deal is getting closer to being agreed across the board. However, just drifting down overnight, but relatively flat. A couple of areas to be aware of is course, with the euro, just be any of these previous highs, I would say, worth keeping an eye on. Let's have a look at that. There you go, this is quite nice here, just spotting this here, the high of Wednesday, the low afternoon, and then we're just respecting that now. So a little line in the sand, perhaps, albeit diagonally, to keep an eye on going forward. And then we would just be looking at any of the previous lows and highs from yesterday, day before, and, and so on. I'll be looking for as well to find some support, much like we had yesterday. You can see where we broke through the, uh, the 11th, came back, and really this sort of time yesterday before that push to the upside. Probably worth having a look as well, uh, at, uh, these most recent highs. So we've got a trend, you can see, pretty good. 1, 2, 3. So yeah, market looking that on the 15-minute. So again, break of that to the upside could be a half decent opportunity. Having a look over at the, the S&P, obviously the volume is really going to be in the afternoon, but the DAX is actually leading the way here as you would expect, looking pretty similar in price action from this morning. Uh, and as well, just get these trend lines on, that could well be another third test coming in just before that pivot point as well. What has been a really key uh, we'll call it a zone of support, previous resistance. You've got the, the highs from the 15th morning and the 14th morning that coming in, and then matching up with the lows that we had from Wednesday and Thursday as a zone. 82, 2982 to 85 would be a key level I'll be keeping a close watch on as we go into the back end of the week. And then of course, if that was to come come into play. Would expect some decent support to come in, and if that was one to break, then I would say not out of the question to get a finish lower into, uh, around sort of 2977, 2973. However, stocks at the moment, you know, let's not kid ourselves, we are still pretty high overall. Just having a quick look, flash over the daily chart, still not far from those all-time highs. Uh, can we get above this trend line, then be looking at highs from yesterday. Obviously the round number, the 3,000, will be one to keep a close watch on as well. Quick look over at what that DAX is doing and how this could drag the, the S&P higher. I would say a key zone is the high of the day. We had some nice price action yesterday, 1, 2, 3, before that breakdown into the afternoon. We then hit it on the retest this morning in the early hours during the Asian trade. So be keeping a watch what happens around 12,666, spooky number. Uh, Pivot as well looks pretty key, price action from yesterday, so they're matching up quite nicely. So I'll keep keeping a watch on that. Have a quick look over some of the commodities. Gold to begin with, Pivot just acting as resistance. I'll tell you what, gold's been a fantastic market, it has to be said, to trade recently. Really nice. I mean, look at this, break of the low comes back, retest resistance. I mean, and it's that magic 1492, which you know I like. Uh, I mean, what a market! Look at how good that resistance up at the top has been. Lovely range, great break, equities pushing higher. Wow, what a— what an opportunity. A bit annoyed I missed that. Um, but yeah, you can see here it— and what we've— what I've said the last few, uh, briefings, I'm just not sure on the overall direction of gold, to be honest. Medium term. I mean, obviously at the moment, if we can break through, uh, 1491, some nice price action over the last couple of days, then why can't we then drift down to towards the S1? But certainly medium term, I'm not too sure. I'm not too sure. You're gonna argue there's some dollar weakness to boost it, then you've got equities going higher, sort of, uh, perhaps in a bit of a consolidation period where it doesn't necessarily know which— what, what it wants to do, and if we squeeze this out, it might be worth even having a look at, oh, how squeezed are we getting in. Nice trend line here starting on the 1st that we know about. We had the false break on the 16th, and, uh, potentially for the upside, you're going to want to see a real big push and a confirmed break above 1,500 to, to the upside there as well. One to keep an eye on anyway. And also from the highs, if we were to get back above the pivot, you know, I'll be looking to to have some of these trends on as well. But really nice market the way it's been moving, I have to say, over the last couple of weeks. Oil having a little go at trying to push above $54 on the futures. And you can see here we broke out the range that have been holding just so firm since— what's the 14th? So that'd be Wednesday, Thursday, Wednesday, Tuesday, Monday afternoon. Really nice area again for oil, which Looks like it's been trading nicely this morning. Breakthrough. I'll be looking at the pivot, obviously, as a key point. I mean, the high that we had back on, uh, the 15th has been tested to the tick, and I'm sure some people are in that, uh, for a long. I think obviously if it was to come back down again, maybe on the third test, you would prefer to wait a bit lower down, and the pivot area could be that point. But like, or like gold, it's been behaving quite nicely, it has to be said. Even yesterday post-DOEs. If we have a quick look at what was the high of the day, you get the breakthrough, come back, retest, you know, you're offside for 2 ticks. I think you can take that before a really nice move, uh, to the upside. Just above where we're trading, we're kind of now on the break point where we broke lower early trade this morning, uh, around 5408. We're knocking on the door there, a bit of a mini range between 84 to the downside, and then 0.8. I'd be interested to see if we can get a break above there to target the overnight and yesterday's high. As usual, any questions, please, uh, do let us know. Um, if not though, I hope you have a good trading day and an even better weekend.