Two Black Swans and uncertainty remains - ANZ

Analysts at ANZ explained that markets affected by the twin political black swans of 2016 – the Brexit vote and Trump win – remain volatile and uncertain.

Key Quotes:

"Having briefly dipped sub-1.20 on expectations that PM May will outline a “hard Brexit” in her speech on Tuesday, GBP stabilised.

But confidence remains fragile and the market continues to probe the downside as concerns over financing the twin deficits (estimated to be 7.5% of GDP collectively this year according to the Bloomberg consensus) and what the appropriate risk premium for Sterling should be in that circumstance continues to dominate.

Politically, countries facing massive trade uncertainty – the UK and Mexico – continue to experience weak exchange rates, which should help facilitate anticipated adjustments and support domestic activity.

Sentiment remains negative, but it is important to remain open minded in case worst-case scenarios don’t materialize, and the market will be closely scrutinizing PM May’s speech tomorrow for near term direction. It is thought the speech may be about 11.45 am GMT, but that hasn’t been confirmed."