£-Sterling ‘applauds’ prospect of Brexit delay

The last week of February was void of significant economic or monetary market drivers, which left global investors to observe the political news-flow. The US President and UK’s Theresa May were therefore quickly identified as the cause of the two more significant market actions: The UK’s £-Sterling rallying to levels not often seen since the fateful Brexit referendum in 2016, and China’s stock market recording a 6% advance on Monday which propelled it decisively into bull-market territory with its near 25% gain since January.

Insight: China’s Bull market drivers

It has been a good year so far for Chinese markets. After the dramatic twists and turns of developed world equities over the past few months, the world’s second largest economy fell off many investors’ radars. We had a holiday, then they had a holiday. It turns out Chinese equities have had a holiday too.

The CSI 300 index – containing the largest stocks on the Shanghai and Shenzhen exchanges – is now up around 24% from the lows seen in early January. For the month of February alone, China’s onshore A shares (as measured by MSCI) returned 14% in £-Sterling terms.

£-Sterling rally- a message?

As we have written before, one asset class that reflects the sentiment of Brexit news flow in a very timely manner is £-Sterling. In a week where most markets remained stagnant, £-Sterling has jumped into life.
From a technical chart perspective, ‘Cable’ (as London’s traders refer to the £/$ cross rate) which started the week at 1.3060 has gone through a key price level (or barrier) at 1.3200. This move also broke through a medium-term (£-Sterling weakness) trend line dating back to March 2018.

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