FxWirePro: Sterling’s hedging touch with pinch of salt as British government seems equipped for ‘No Deal Brexit’

Brexit negotiations resumed last week and scheduled in Brussels today. The focus now turns on the meeting between EU’s Chief Negotiator Barnier and the UK’s Brexit Secretary Raab as the need for the progress is becoming exceedingly vital, with some key autumn deadlines fast approaching. The UK would likely publicise the first of a series of technical notices on Thursday to prepare for the possibility of ‘no deal’, according to the sources of Lloyds.

While the risk of a “No Deal Brexit” appears to be slightly waned again from the market’s standpoint, at least that is what the option markets are suggesting at this juncture as minor positive shifts in risks reversal (RRs) numbers are observed for the mild bullish risks, where the prices for hedges against a collapse of Sterling have eased again (refer above nutshell evidencing RRs, you could figure out slight shift in hedging sentiment across all tenors). 

It seems quite unforeseen that there was no driving force to support this development – quite the contrary. It became known yesterday that the British government has already prepared a plan to confront a no-deal scenario that would be published bit by bit so that companies and private households can prepare accordingly. 

The chief negotiators of both sides will meet again today to continue the negotiations. Unless this results in some clear progress it would be sceptical about the recent GBP calm. 

Currency Strength Index: FxWirePro's hourly GBP spot index is flashing at 43 levels (which is bullish), while hourly USD spot index was at shy above -85 (bearish) while articulating (at 13:38 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex