GBP remains firm despite no MV today; Stocks gain

Summary:

• GBPUSD hits new 5 ½ month high above $1.30

• Gains come despite no meaningful vote today

• US stocks start the new week higher

• South Korea shows another tremendous exports decline

The first Saturday sitting for UK parliament since the Falklands War turned out to be something of an anti-climax with most observers left none the wiser as to where this leaves us on Brexit. The passage of the Letwin amendment forced Boris Johnson to submit a letter to the EU requesting an extension and while this was not signed from the PM, and also accompanied by additional letters essentially stating to ignore it, this does still satisfy the criteria needed for a legal request. 

As should come as little surprise to those who follow John Bercow, the speaker of the house has announced that there will be no meaningful Brexit vote today. Bercow stated that the matter was decided less than 49 hours ago and it is hard to see a change of circumstances that would warrant a reconsideration on the next sitting day. 

However, he was also keen to state that it was legitimate for the government to introduce its EU withdrawal bill and as such we can expect the key vote to take place tomorrow. There is a growing expectation that this bill will pass tomorrow and therefore we could be set for further upside in the pound, with the latest positioning data still suggesting an elevated level of shorts that may be forced to cover in the event of a market positive outcome. GBPUSD shrugged off parliament’s failure to vote in the Brexit deal on Saturday or today and surged past 1.30 earlier – the highest since May 2019 and up staggering 8 figures in 11 days! 

After having a look lower on Friday stocks are moving higher once more so far today, with European benchmarks trading higher and US indices also in the green at the end of the European session. The markets have received a further lift this afternoon after some positive remarks from Kudlow on Fox Business as follows (emphasis is our own): 

• If phase 1 China talks go well, December tariffs could be taken off

• Things look pretty good as US-China trade talks continue

• Human rights are an important part of negotiations

South Korean exports tumbled 19.5% YoY during the first 20 days of October, the second deepest decline since 2016. Taking into account that this data is treated like a bellwether for global trade, one may expect the global trade is not out of the woods yet. The detailed data showed that shipments to China, South Korean largest trade partner, dropped 20% while those to Japan dwindled 21% in annual terms. Moreover, the South Korean economy is also showing lingering signs of a domestic demand weakness with imports tumbling 20.1% YoY during the first 20 days of this month.