CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

The 12-point plan – the view of Brexit from Australia

While there is still clarity needed, it seems bizarre that the UK will be granted a free trade agreement with Europe, while also gaining full control of their borders away from the shackles of the European Court of Justice (ECJ) to set laws without external influence.

anonymous

Publication date : 2017-01-18T01:46:42+0000

Pound

Source: Bloomberg

Outside of the customs union, the UK can negotiate free-trade agreements with US, China, India and Australia (among others), all the while having a currency that is not shared and can be influenced fairly easily.

If the UK flourish under this fairly ideal plan (we should firstly congratulate them on having a plan), then one struggles to see how a free-trade deal gets full broad sign off from the 27 European Union members at a time of great political change, a move to populism and a growing view that certain countries could be better off outside the EU/EMU. With Angela Merkel and Francois Fillon basing their 2017 elections on being stronger within Europe, one questions the longer-term reverberations of a UK economy that flourishes as a result of a clean Brexit.

Once Article 50 is triggered, the ball is in Europe’s court - they will dictate the terms. Teresa May will be sounding far more conciliatory from here.

GBP is purely a political currency and the 12-point plan and road ahead gives traders no clarity on the future of UK economics.

If we use longer-term valuation models, such as producer purchasing power parity (PPI), we can see GBP is 25% undervalued relative to the USD, while the Big Mac index shows GBP is 33% undervalued. At current levels, GBP/USD is around 25% below the average since 1980. That’s not to say we will see the pair’s mean revert, but if you take out the political issues regarding Brexit means there is little doubt GBP flies. That, of course, is a big ‘if,’ as a smooth transition still seems unlikely and the consensus in the market remains to sell GBP into higher levels.

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Clients can lose more than they deposit. All trading involves risk.

IG is a trading name of IG Markets Ltd and IG Markets South Africa Limited. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in order to utilise their foreign investment allowance should the South African resident wish to open an offshore account with IG Markets Limited.

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