After three and a half years of chronic uncertainty, drama and constant toeing and froing, the Brexit saga is reaching a critical turning point.
In a positive development, Boris Johnson has agreed on a Brexit deal with the European Union. However, it is far too early for any celebrations given how the deal will need to be approved by the House of Commons on Saturday. While the revised agreement has many similarities with the one agreed by Theresa May, the major difference lies in the proposal on Northern Island. The new Brexit deal simply replaces the Irish backstop plan with a new arrangement where the North will continue to follow EU regulations on goods after Brexit.
With Northern Ireland’s DUP already refusing to support Boris Johnson’s deal, investors should brace for another showdown in Westminster on Saturday. Although EU leaders have left the doors open for a Brexit extension beyond October 31st if Johnson’s plan is rejected by the commons, this is simply kicking the can further down the road.
If Boris Johnson’s deal is given the thumbs up by the House of Parliament this weekend, it will be a major relief for the British pound as fears of a no-deal Brexit completely fade. This welcome development should push the GBPUSD well above 1.30 towards 1.318. Alternatively, if Johnson’s deal fails to pass through parliament, the Pound is seen sinking back towards 1.27 as uncertainty makes an unwelcome return.
Will the Brexit saga come to end on Saturday? Or will this be the start of another drama-filled season? This is the question on the mind of many investors.
Whatever the outcome of ‘Super Saturday’s’ Brexit showdown, it will certainly have a profound impact on Sterling.
Gold waits for fresh catalyst
Gold is finding comfort within a $20 trading range as investors remain cautiously optimistic over the United States and China finalizing a “phase one” trade agreement.
Given how high-level trade talks between both sides will resume next week, Gold is positioned to remain range-bound until a fresh directional catalyst is brought into the picture. A sense of optimism surrounding the current Brexit developments is also impacting appetite for the safe-haven metal with prices trading around $1491 as of writing. Although a softer Dollar could provide Gold bulls with some support, the real action may not be seen until next week following the outcome of ‘Super Saturdays’ showdown and trade talks.
Focusing on the technical picture, Gold remains range-bound with support around $1480 and resistance at $1500. A breakout above $1500 should encourage a move higher towards $1515. Should prices secure a weekly close below $1480, Gold is likely to sink towards $1465.
Commodity spotlight - WTI Oil
Oil prices are pushing higher despite China’s economic growth slowing to 6% during the third quarter of 2019.
Given how China is the world’s largest energy consumer, signs of slowing economic growth from the nation could ignite fears of a drop in demand for crude oil. Regardless of recent gains, Oil markets remain heavily influenced by demand side factors revolving around trade uncertainty and global growth fears. If the United States and China officially sign a “phase one” trade agreement, Oil prices have scope to push higher as trade tensions ease.
Focusing on the technical picture, WTI Oil is trading above $54 on the daily charts. A weekly close above this level should encourage an incline towards $55.
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