A few thoughts on the UK election fallout for the pound 19 April
What a crazy 24 hours eh? Rumours of a snap UK election sent the pound lower and confirmation of the fact then sent it on a relatively one-way ticket to the stars.
So what are we to make of all this? Too early to call still imho. My strategy of selling GBP rallies and taking money off the table in the dips has paid well in recent months/years and I hope it's made a few of you some decent money too.
Yesterday I advised that I'd be staying out and looking for an opportunity to sell because, frankly, I didn't understand the reaction and subsequent extent of the price action. Indeed, I left my desk and was out to dinner with an esteemed former city colleague chewing the cud and ironically discussing what might happen next as the pound jumped even higher in nano-seconds.
Have I jumped in yet? No. Am I in a rush to do so? Not really. Do I think cable can go to 1.3500 in this move? Unlikely. Am I still a seller overall ? Oh yes, until proved/convinced otherwise.
Years of experience and basic trading discipline, such as we try and teach here, tell me not to get involved in what I don't understand, and I don't fully get why so many people see this early election as bullish for the UK. I do get however that a lot of what we are seeing is a degree of short-squeeze for those feeling less comfortable and squeezed out by the robots.
I do see the plus side of political stability but the overall Brexit landscape is unchanged except we now have more uncertainty over whether it will be "hard" or soft". Hard is GBP negative overall and vice versa.
On the political front I think May has taken a big gamble, albeit a considered one, in that she and her advisors have underestimated the anger/bitterness of the Remain voters (as she herself was) and that will come into play. I will be looking to short the Conservative seat majority as, if the Lib Dems finally get their act together, I can see a few Tory MPs in those Remain constituencies out of work .
Anyhow lots to talk about over the next few weeks and we most certainly will. This is not meant to be a definitive or "clever" piece of writing but I've read lots of rants and raves in the comments and just felt I should highlight one great mantra I, and others have been using for years and that is "if in doubt, keep the **** out".
We don't need to trade all day every day to make money over a concerted period of time. In fact I have voiced concerns here before about the number of retail traders who spend too much time in front of their screens and trying to second-guess every move.
Congrats to all who made pips on yesterday's rally and commiserations to those who got caught on the wrong side. No one ever said FX is simple and we know that a very high number of traders lose money so keeping your head when all around are losing theirs is key.
Sometimes nothing really can be a real cool hand.
