Jan 16th 2017: Pound Slammed Ahead of May Speech

• Markets are preparing for the worst ahead of Theresa May’s Brexit key Brexit speech today. The pound is dropping on fears that the UK will close access to the EU’s single market and other knock on effects of Brexit. For 2017, the pound is now down 2.58% against the dollar, 3.41% against the euro, 5.44% against the yen and 6.41% against the Aussie dollar. Sterling is challenging intraday lows set back in October against major currencies.
• Meanwhile, the dollar gapped higher following Trump’s speech at the weekend, in which he outlined his policies on China, Russia and other key areas.
• The Australian dollar is pulling back after week’s of out-performance, with the AUD/ JPY down 0.82% this morning.
• There is big demand for the yen so far this morning, as the USD/ JPY continues its sell-off for 2017.

Coming up today:

• Coming up today, we have UK BOE governor Carney speaking at 18.30.
• It is a bank holiday in the US for Martin Luther King day

Trade Idea:

• The pound is being hit hard this morning as traders reduce risk ahead of Theresa May’s key Brexit speech. This has come despite there being no firm steer in either direction.

• Markets hate nothing more than uncertainty, but markets could have jumped the gun here. It’s worth betting on the pound recovering in the short term from here. The may be some value in a higher trade, especially against the euro which is facing its own risks.
• A good way to play this is a HIGHER trade predicting that the EUR/ GBP will close above 0.8900 in 14 days for a potential return of 149%.