GBPEUR: scenario for a hard BREXIT
Updated
I'm not really interested in currency due to being pretty boring markets more than anything, but it is a necessary evil in our world. GBP is interesting for me being British and also because of its long market history spanning many centuries. It's story has been one of decline for many, many years now as the Americans took over what remained of the British Empire. The creation of the EU and Euro (both of which the UK has strenuously tried to undermine since their inception) will be the final nail in the coffin imo. But I am a transnationalist at heart.
Europe & BREXIT
The European project, in its present form, dates back to the 1957 Treaty of Rome in which the European Economic Community (EEC) was born. Britain was not party to the treaty, nor was it welcome, at least not by the leading founder France. From their point of view, the goal was always a strong union, i.e. political, military and economic. As many will agree, the history of Central Europe has always been dominated by the struggle between the Germans and their neighbours. The Second World War was yet another deeply tragic cycle in this terrible dance. But the ambitions of Germany's neighbours, not least France, have likewise come at the cost of others (not least Germany: France strongly opposed German reunification for example). It seems Europe is a zero sum game and post-war circumstances meant that Paris could once again take the lead in shaping the New Europe according to its Gallic vision. However that vision did not include the old enemy Britain, whose role in European history was always to defend its position at the periphery and to muddy the waters of Continental ascendancy as much as possible (perfidious Albion).
They were right of course! Since joining in 1973 (only after the ousting of de Gaulle), Britain has done little but derail those early French ambitions with successive Prime Ministers and opinion-makers opposing European integration measures and treaties. On top of this, the German Miracle shifted the focus from Paris to Berlin in the 1990s. The German's, clever as ever, understood the benefit of the Euro for the export markets (which also conveniently also allowed their trading partners in Europe access to cheap credit). They also knew that they were on the cusp of greatness once again as the Wall came down and those markets to the east became accessible. Today, it seems, it is the Germans that have the most to lose from European disunity, yet we notice the most vocal detractor of Britain in the BREXIT-era is France's new centre-right leader, Emmanuel Macron. For the Gaullist elite, BREXIT (and the harder the better) is a godsend; the Germans, whose greatest leader ever is about to retire (and believe me, there is as yet no other figure that can unify such a bipolar country), will not oppose greater political and military integration so long as they can still have a guiding hand at the top and, more importantly, keep control of the economic union.
From this perspective, I believe that certain European factions that uphold the original de Gaullist agenda would like to see the back of the United Kingdom in the form of a hard BREXIT. At the same time, Germany and its allies would much rather see, at most, a soft BREXIT based on maintenance of the European Economic Area (EEA). Unfortunately, this latter position is roundly rejected by British Eurosceptics and lies at the heart of the problem.
Therefore, in my opinion, there is no deal which will satisfy all parties!
If a soft BREXIT is forced, it will be a fudge and contrary to the spirit of the original 2016 referendum result. Let us therefore assume for now that a hard BREXIT is on the cards. What does the chart say! How much room is there for the market makers to crash this market?
But this is just another alarmist scenario!
Normally I would say, yes. But do not underestimate the historical significance of a hard BREXIT. This will give the market makers the once in a lifetime opportunity to push the GBPEUR pair to historic lows and test the strength of the Euro over the pound. Also remember the Euro is the dominant currency in the Dollar Index basket and remember it constitutes China's second largest foreign reserve holdings. The one fundamental weakness of a Europe-with-a-strong-Germany is that it is at heart fundamentally weak: historic cycles dictate that a strong Germany is most often followed by a weak Germany. Despite what popular 'alt'-media would you like to believe, Germany (which is a very disunited country in terms of both religious (catholic/evangelic split) and regional culture) has boomed in the last two decades not least due to the uniting effect of one Angela Merkel - possibly the greatest German Chancellor ever - who united East and West, South and North, city and country. And she is leaving office...
It is a watershed moment, and as usual nothing is certain.
Europe & BREXIT
The European project, in its present form, dates back to the 1957 Treaty of Rome in which the European Economic Community (EEC) was born. Britain was not party to the treaty, nor was it welcome, at least not by the leading founder France. From their point of view, the goal was always a strong union, i.e. political, military and economic. As many will agree, the history of Central Europe has always been dominated by the struggle between the Germans and their neighbours. The Second World War was yet another deeply tragic cycle in this terrible dance. But the ambitions of Germany's neighbours, not least France, have likewise come at the cost of others (not least Germany: France strongly opposed German reunification for example). It seems Europe is a zero sum game and post-war circumstances meant that Paris could once again take the lead in shaping the New Europe according to its Gallic vision. However that vision did not include the old enemy Britain, whose role in European history was always to defend its position at the periphery and to muddy the waters of Continental ascendancy as much as possible (perfidious Albion).
They were right of course! Since joining in 1973 (only after the ousting of de Gaulle), Britain has done little but derail those early French ambitions with successive Prime Ministers and opinion-makers opposing European integration measures and treaties. On top of this, the German Miracle shifted the focus from Paris to Berlin in the 1990s. The German's, clever as ever, understood the benefit of the Euro for the export markets (which also conveniently also allowed their trading partners in Europe access to cheap credit). They also knew that they were on the cusp of greatness once again as the Wall came down and those markets to the east became accessible. Today, it seems, it is the Germans that have the most to lose from European disunity, yet we notice the most vocal detractor of Britain in the BREXIT-era is France's new centre-right leader, Emmanuel Macron. For the Gaullist elite, BREXIT (and the harder the better) is a godsend; the Germans, whose greatest leader ever is about to retire (and believe me, there is as yet no other figure that can unify such a bipolar country), will not oppose greater political and military integration so long as they can still have a guiding hand at the top and, more importantly, keep control of the economic union.
From this perspective, I believe that certain European factions that uphold the original de Gaullist agenda would like to see the back of the United Kingdom in the form of a hard BREXIT. At the same time, Germany and its allies would much rather see, at most, a soft BREXIT based on maintenance of the European Economic Area (EEA). Unfortunately, this latter position is roundly rejected by British Eurosceptics and lies at the heart of the problem.
Therefore, in my opinion, there is no deal which will satisfy all parties!
If a soft BREXIT is forced, it will be a fudge and contrary to the spirit of the original 2016 referendum result. Let us therefore assume for now that a hard BREXIT is on the cards. What does the chart say! How much room is there for the market makers to crash this market?
But this is just another alarmist scenario!
Normally I would say, yes. But do not underestimate the historical significance of a hard BREXIT. This will give the market makers the once in a lifetime opportunity to push the GBPEUR pair to historic lows and test the strength of the Euro over the pound. Also remember the Euro is the dominant currency in the Dollar Index basket and remember it constitutes China's second largest foreign reserve holdings. The one fundamental weakness of a Europe-with-a-strong-Germany is that it is at heart fundamentally weak: historic cycles dictate that a strong Germany is most often followed by a weak Germany. Despite what popular 'alt'-media would you like to believe, Germany (which is a very disunited country in terms of both religious (catholic/evangelic split) and regional culture) has boomed in the last two decades not least due to the uniting effect of one Angela Merkel - possibly the greatest German Chancellor ever - who united East and West, South and North, city and country. And she is leaving office...
It is a watershed moment, and as usual nothing is certain.
Note
Here 200 years of GBPUSD. Continuous decline since the US Civil War. Data from St Louis FEDtwitter.com/BarclayJames1/status/1101466817980190720
It's said, even by the British, that Britain was country that always punched above its weight...
Note
Prime Minister May resigns. youtube.com/watch?v=_t25xAp270oNote
GBP pumping a little against EUR today - perhaps n the news of Boris Johnson's first round win in the Tory leadership contest with 114 votes. His main rival appears to be Jeremy Hunt with 43 votes. Perhaps this looks like some decisiveness for a change!The question is, which Boris is one the country going to get: this is after all a man who was fired from the Times for making up quotes. I guess he will be the Boris that can most profit at any given time, and who knows, not having any personal convictions might actually a good thing in this case xD
The story continues...
Note
NODEAL could lead to 0% interest rates, says BoE theguardian.com/business/2019/jul/12/no-deal-brexit-could-mean-near-zero-interest-rates-says-bank-policymaker-gertjan-vliegheNote
Johnson in Germany meeting with Merkel today; markets will be watching. If there is no concession from Europe (which there won't be) this will likely induce further selling imo.Note
Peter Zeihan explaining his view of Brexit in 3 minutes: youtube.com/watch?v=pKVQDUQR8I4&t=27mNote
Here he explains why he thinks London's volume as a financial centre will shrink by 75% after Brexit with the bulk of trade going to USA. youtube.com/watch?v=pKVQDUQR8I4&t=42m50sNote
So PM Johnson was in Berlin and Paris, where both the German and French leaders managed to make him look like a fool. Firstly Merkel's expression of exasperation that despite not achieving a deal over 2 years of intense negotiations, maybe Boris was right and that a deal could be had within a month. LOL, this is German irony. and Mr Johnson misunderstood completely. Second, crafty Macron's tick to persuade Johnson to put his shoe on the table in the Elysee Palace - all in good fun - and of course with a waiting French photographer to snap the picture.Tailored to the view of EU elites that Britons have neither guile nor know how to behave in polite society.
This was PM Johnson's 'big chance' and was told in no uncertain terms. There will be no deal.
Note
Now PM Johnson will prorogue parliament for 5 weeks, meaning that no official debate can be had on the subject of BREXIT throughout December. This can mean only two things:1) He thinks he can pressure the Europeans by showing them he can risk no deal, and he thinks that they need a deal more than the UK.
2) He really does want a no deal and he is going to put Parliament in lockdown so that no one can stop him.
I think personally it's the first option. He believes that the EU will 'cave in', however I think he is mistaken if that is the case.
I think there is a good chance the pound will retest €1.08 in the coming weeks.
Note
** should read SeptemberNote
GDP of various countries/entities including: UK, EU excluding UK, USA and Francophone Africa (Check UK vs. EU, Francophone Africa already outstrips UK and is starting rocket) twitter.com/BarclayJames1/status/1167740135955488768Interesting fact: in terms of speakers, French is the world's fastest growing language and covers regions that predominantly make up some of the world's youngest populations. In addition France oversees the the two versions of the CFA Franc used as a single currency in West and Central Africa, which is also pegged to the Euro.
France has been intensifying its pivot back to Africa under Macron, spending 100s of millions every year in French-style schools. Macron recently told students in Burkina Faso that French will become the number one language in Africa and perhaps the world, to rousing applaus (youtube.com/watch?v=nh5i2KF2X1o). The demographics are in their favour. By then end of the century Chinese and Indian population growth will have long since stagnated and entered post industrial structures. Sub Saharan Africa will not only be the largest region by population, it will also be the only region with a consumer demographic.
Note
Leaked government report concludes there is no alternative to Irish border backstop:theguardian.com/politics/2019/sep/02/irish-border-after-brexit-all-ideas-beset-by-issues
Note
Lol London very leaky... another 'leaked' report concludes there will be delays at British ports of 2-days for customs clearance in event of a no deal and returning to WTO terms. The infrastructure just doesn't exist anymore to process the volume of traffic. The term “clear and present danger” to the UK supply chain is used. No surprises really. This will lead to inflation as imports become more expensive.theguardian.com/world/2019/sep/02/leaked-no-deal-report-says-lorries-could-face-48-hour-delays-at-dover
Note
EU response to UK unequivocal. Luxembourg PM addresses home crowd in English, spells out that preservation of European Common Market is more important that any one country. Boris Johnson too fails to speak due to heavy booing from crowd.youtube.com/watch?v=DtMC1SsKhIU
Looking very much like a No Deal folks....
Note
Notice every time Boris goes to Europe, they manage to make a fool of him.Note
youtube.com/watch?v=gqRU44jJ-Ew speaking from the heart
Note
What we already knew...youtube.com/watch?v=eLH-wXNCtEA
Note
My my high drama in Westminster. Deal or no deal it doesn't matter if you can't get it through parliament. I guess that's why Boris wanted to suspend it lol. Already the government coalition has fractured with the DUP saying they will vote against the deal. The Scots will vote against the deal and the Labour must vote against the deal because it represents the death of the British worker (loss of EU rights and worse compliance with US capitalist demands). So no deal...Part of me wants to see the 51st state as George Orwell predicted the UK would become, but that part of me that still loves the UK would like to see it survive past my lifetime. A change of government is needed. Johnson cannot stop the US from destroying the British way of life. Only Labour.
Note
So No Deal Brexit is still on the table.
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