Pepperstone logo
Pepperstone logo
  • English (UK)
  • Ways to trade

    Pricing

    Trading accounts

    Trading hours

    24-hour trading

    Spread betting vs CFDs

    Maintenance

  • Trading platforms

    Trading platforms

    TradingView

    MetaTrader 5

    MetaTrader 4

    Pepperstone platform

    cTrader

    Trading integrations

    Trading tools

  • Markets

    Markets to trade

    Forex

    Shares

    Indices

    Commodities

    Currency Indices

    Dividends for Index CFDs

    Dividends for Share CFDs

    CFD Forwards

    ETFs

  • Market analysis

    Market news

    Navigating Markets

    The Daily Fix

    Meet the Analysts

  • Learn to trade

    Trading guides

    CFD trading

    Spread betting

    Forex trading

    Commodity trading

    Stock trading

    Technical analysis`

    Day trading

    Scalping trading

    Candlestick patterns

    Upcoming IPOs

    Gold trading

    Oil trading

    Webinars

  • Partners

  • About us

  • Help and support

  • Professional

  • English (UK)
GBP

The Daily Fix: Into the eye of the storm in Brexit talks

Chris Weston
Chris Weston
Head of Research
9 Dec 2020
Share
There's been some solid two-way flow from clients in gold, with the XAUUSD pushing into 1875 and extending the gains from the recent lows of 1764.

Further covering of gold shorts is assisting, as is the dip lower in US real (inflation-adjusted) Treasury yields and a stable USD. Moves into 1884/7 should cap rallies in the near-term where I’d expect traders to trim, but it’s all eyes on the ECB meeting tomorrow and whether they can affect the German bund market, which will invariably influence both the EUR and the USDX.

(XAUUSD daily)

09_12_2020_DFX1.png

More on the ECB meeting for tomorrow night here and here.

If we work solely on probabilities in trading I think the ECB should over-deliver, which suggests a higher risk that within a week that we see 1.2000 emerge (in EURUSD) before 1.22. Although the options market is slightly skewed for a higher probability of 1.2200 being seen at 20.6% (vs 17.8% for 1.2000).

Tesla has also crept onto the most traded flow report and remains a trader favourite, with good buying in the pullback into $618.50. The weakness was driven by the announcement that they plan the third share sale in 10 months, raising $5b in an at market sale. This should take the cash hoarding to $20b which is more than 88% of firms in the US. They may not have earnings, but they do have cash and that it seems gives them options and the market is happy to keep the bid alive.

Trading Brexit talks

The GBP remains high in the mix too, with good flow in GBPUSD, GBPJPY and GBPNZD. EURGBP continues to find sellers in rallies into the 91-handle and you can see this portrayed clearly on the daily timeframe. GBPUSD 1-week implied volatility traded into 17.3% yesterday but has retreated somewhat to 16.5% which still suggests GBPUSD is where you go for movement in G10 FX. Overnight vol has been wild, moving to a punchy 27.9% before pulling back to 15.8%. I’ll inform traders around this today on Telegram, as it gives insight ahead of tomorrow’s now highly anticipated dinner between Boris Johnson and EC President Ursula von der Leyan.

EURGBP daily

09_12_2020_DFX2.png

Trading GBP has not been something those who cut their craft on daily charts would've found easy, with incredibly whippy price action and with some rapid moves from 1.3290 to 1.3393 - only to revisit those lows again within two hours. We’re now in the 51st percentile of the day’s range with very little conviction to do much other than scalp the pair.

Taking a view longer than five minutes and if this is indeed a binary event, which it's in the sense of whether we get an agreement of a deal this week or not. However, there's more to it than that and if we do get a deal the extent of the rally in GBP (should we get a so-called bare-bones free trade agreement and FTA) will be down to the duration of the implementation phase. I’d argue that for those calling for an FTA the consensus would be a phased approach which takes GBPUSD, theoretically, into 1.3500/36.

Put a gun to my head and I’d be a buyer of GBP, as I see the risk skewed that Boris would come back with some sort of agreement or at least commentary that leaves us believing an announcement is near. However, whenever I see implied vol at these levels I would be highly cautious with minimal position sizing and my stop would be sub-1.3100, which doesn’t imply a good reward to compensate for the risk.

If no agreement is found and the market is treated to headlines as such then the GBP bears will start to really work the market lower. A factor already seen in the options market with put volatility trading at a solid premium to calls.

Outside of the negative options skew, broad positioning is short GBP but not at extremes by any means. This limits the prospect we get an exaggerated short-covering rally to say 1.3800 - 1.4000. Perhaps for these levels to be seen we’d need to see a combination of USD weakness, equity momentum picking up and news that the FTA implementation would be 12-months or so which seems highly unlikely.

Outside of Brexit shenanigans we see moves in Tesla, XAUUSD and positioning ahead of the ECB meeting. We also see US equities march higher with new highs in the US500. Energy is leading the charge with staples and materials working well on the day – again, we’ve seen holiday level volumes play out with 900k S&P 500 futures contracts traded. The big hitters are seemingly calling it a year. Crude is marginally higher with net sellers in copper and iron ore.

On the docket today we get Chinese CPI/PPI (12:30 AEDT) with the consensus expecting price pressures to fall. Aussie Westpac consumer confidence is due at 10:30 AEDT, although this shouldn’t move the AUD to any great capacity.

At 02:00 AEDT we hear from the Bank of Canada so keep an eye on CAD exposures if running them. 1.2768 (in USDCAD) looks like good support, while any covering of shorts in the pair takes us into 1.2923/29 (the 38.2 fibo of the 1.3183-1.2768 move, and 9 Nov low) where this could offer better levels for those looking to fade rallies.


Related articles

The Daily Fix: Brexit deadline set for Wednesday with US fiscal in play

The Daily Fix: Brexit deadline set for Wednesday with US fiscal in play

UK
The Daily Fix: The EU-UK Brexit showdown

The Daily Fix: The EU-UK Brexit showdown

USD
GBP
EUR

Most read

1

The disinflationary message seen in commodities and rates markets

2

Will the BOJ be the last dovish domino to fall?

3

Trader thoughts - the conflicting forces dictating EURUSD flow

Ready to trade?

It's quick and easy to get started. Apply in minutes with our simple application process.

Get startedSubscribe to The Daily Fix

The material provided here 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. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

Other Sites

  • The Trade Off
  • Partners
  • Group
  • Careers

Ways to trade

  • Pricing
  • Trading accounts
  • Pro
  • Trading hours

Platforms

  • Trading Platforms
  • Trading tools

Markets and Symbols

  • Forex
  • Shares
  • ETFs
  • Indicies
  • Commodities
  • Currency indicies
  • CFD forwards

Analysis

  • Navigating Markets
  • The Daily Fix
  • Pepperstone pulse
  • Meet Our Analysts

Learn-to-trade

  • Trading guides
  • Videos
  • Webinars
Pepperstone logo
support@pepperstone.com
+442038074724
70 Gracechurch St
London EC3V 0HR
United Kingdom
  • Legal documents
  • Privacy policy
  • Website terms and conditions
  • Cookie policy

© 2025 Pepperstone Limited 
Company Number 08965105 | Financial Conduct Authority Firm Registration Number 684312

Risk warning: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74.8% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Trading derivatives is risky. It isn't suitable for everyone and, in the case of Professional clients, you could lose substantially more than your initial investment. You don't own or have rights in the underlying assets. Past performance is no indication of future performance and tax laws are subject to change. The information on this website is general in nature and doesn't take into account your or your client's personal objectives, financial circumstances, or needs. Please read our legal documents and ensure you fully understand the risks before you make any trading decisions. We encourage you to seek independent advice.

Pepperstone Limited is a limited company registered in England & Wales under Company Number 08965105 and is authorised and regulated by the Financial Conduct Authority (Registration Number 684312). Registered office: 70 Gracechurch Street, London EC3V 0HR, United Kingdom.

The information on this site is not intended for residents of Belgium or the United States, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.