Brexit and the Pound – JenkinsRM

Brexit and the Pound

As the Brexit vote approaches it seems those who wish to keep the current power structure in Brussels as well as the establishment in Britain continue to push for Britain to remain in the EU, however it is the Troika that has pushed Europe to the brink of a serious financial crisis and Margaret Thatcher had it right, that Britain should not hand over its monetary and political sovereignty to the European Commission and Britain could achieve greater economic and monetary cooperation by maintaining its sovereignty.

All we have to do is look at what kind of decisions come out of Brussels such as in 2014 when Britain lost a legal challenge to the European Union powers to ban short-selling in key test case that has major implication for the City of London’s financial services.

“The power of the European Securities and Markets Authority (Esma) to adopt emergency measures on the financial markets of the Member States in order to regulate or prohibit short selling is compatible with EU law,” ECJ judges ruled on Wednesday.

“As all the pleas in law relied on by the United Kingdom have been rejected, the court dismisses the action in its entirety.”

These types of authoritarian measures on the free markets is what we have to look forward to and should Britain stay in the EU we can be certain of more of the same and this would put more pressure on London as a global financial hub. The demise of the London Stock Exchange cannot be ruled out come 2025. That will be 224 years from its founding in 1801, 224 year cycle is a key political cycle and a key cycle time-frame of change through history.

London Exchange 1801

London Stock Exchange 1801

As far as the Pound, the long-term trend is still bearish. We can see this very clearly on the Monthly and Weekly levels. So we remain short GBP/USD and we also like being short Sterling vs the Yen (GBP/JPY).

We can see the 2 standard deviation channel on GBP/USD is defining the trend well. Based on this tend, and channel we should see the Pound test the Jan 2009 lows of 1.35. That level on a monthly and yearly closing basis will be the key most likely as to whether GBP/USD moves into a waterfall event or not.

The risk to the upside is a move back above 1.60 longterm if you are short, but until you get a weekly closing at minimum above 1.60 there will be no change to longterm downtrend for Sterling.

 

GBPUSD Monthly Chart

GBPUSD Monthly Chart

Here’s the weekly chart of GBP/USD….

GBP/USD Weekly Chart

GBP/USD Weekly Chart