What are the key events on this chart?
• 19. June 2016: the Brexit referendum took place. The red dotted line shows how intense GBP sales the referendum induced.
• 29. September 2016: Theresa May was elected as Prime Minister of the UK, her first statement was “ Brexit is Brexit, we will leave the EU”. Parallel, the EU stated that there can only be a “hard” Brexit. The British Pound weakened again.
• Rise between 20 November and 4. December 2016:
◦ The EU announced that a “weak” Brexit was also possible. Britain might buy the EU’s rights, although it is against the promise of the referendum that the UK will no longer be a contributor to the EU.
◦ A good friend of the UK, Donald Trump won the US presidency. Special treatment of the UK by the USA might be able to compensate the impact of Brexit.
• Since 5. December 2016: the British Pound has been weakening
◦ Financial institutions of the City of London plan their relocation to Germany and France.
◦ Poor UK Manufacturing and Industrial Production Data has been released.
Why did Trump’s victory help UK markets?
As Donald Trump has won the US presidency in early November 2016, investors have turned less pessimistic on the Pound, because Trump plans to tighten the relationship with the UK. The president-elect told Prime Minister Theresa May in a phone call following his victory that “the UK is a very, very special place for me and for our country”. This would help the UK because it will need a strong trading partnership with the US in order to offset the downgrade in trade with countries of the European Union. The US is the UK’s biggest export market outside of the EU.
What is the reason of poor UK Manufacturing and Industrial Production Data?
The latest news reported that British Pound dropped both against the US Dollar and the Euro on release of incredibly poor UK Manufacturing and Industrial Production Data. UK manufacturing production data had fallen 0.9% on a month-on-month basis in October 2016. This is really much worse than the 0.2% growth that analysts expected.
Furthermore, industrial production dropped 1.3%, a larger decline compared to the +0.2% of the forecast. One of the main reasons of the decline is the decreasing oil & gas output partly due to the temporary shutdown of the Buzzard oil field in the North sea.
How can binary options traders make profit with trading options on GBP?
It seems that the Pound will not be able to rise to the level before Brexit even in years. Analysts forecast a further downtrend, the GBP/USD rate may weaken to 1:15 – 1:10 from the current 1:26. So, the main trend traders can use is weakening. But certainly, there will be further ups and downs in the exchange rate.
Binary options traders need to keep their eyes on the news coming from the UK and trade accordingly. A few hints for binary trading:
• When the Buzzard oil field is re-opened after maintenance, the Pound might increase.
• If there are successful negotiations between the EU and the UK, the Pound will gain some strength.
• When the UK actually triggers Article 50 and start the exit process, the Pound might drop again.
• When Prime Minister Theresa May visits President Donald Trump in the US, the Pound rate might increase.