Flash Crash And Brexit Fallout Continues
Nordea wrote a note in which it argues that what happens in the Danish trade figures is a preface to the broader Brexit effect. Danish exports to the UK fell 9% in the period June-August and there is little to expect an improvement soon.
To set a benchmark, the overall value of Danish exports to the whole EU dropped 3% in the same period.
Nordea analysts claim that the deterioration in the trade with UK should be attributed to the GBP performance since the Brexit vote. We present you what happened to GBP year-to-date, as the Brexit fears started to affect the pound much earlier.
How much the pound lost to other G-10 currencies since the start of the year; Source: Bloomberg
The numbers below suggest that the depreciation is truly high enough to cause major distortions in trade patterns – but this should be only good news for British exporters – and this is confirmed in September PMI reports. It may pay to watch EU’s trade numbers from this point of view, but the recent good figures from Eurozone real economy and a rebound in business sentiment may hide this trade story for now.
The pound is not trying to re-visit the levels seen during the flash crash. If we will see more evidence that the negative sentiment on GBP is waning it could still be possible to re-launch our trade idea based on the assumption of further positive dataflow from the UK, described in our currency report on GBP. The first attempt hit a stop loss during the highly surprisingly flash crash. We will watch the pound’s behavior after the next data point we indicated in the report – the retail sales proxy coming this night.
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