[The Bank of England sharply raised its growth and inflation expectations, and the UK High Court ruled that the parliament voted to leave the European Union, and the uncertainty of the US election caused the dollar to fall, which caused the pound to temporarily suffer.]

Since the second half of this year, the pound has been staged as an amazing "big adventure." Since the Brexit, the trend of the pound has been very dramatic, and the heart rate of many foreign exchange traders has accelerated - the pound plunged 10% before and after the Brexit, and then returned to calm, and then to October due to British Prime Minister Theresa May. Hard Brexit’s remarks and an instant “flash collapse”, and last week, the story suddenly took a “shocking reversal” – the British High Court ruled on November 3 that triggering the 50th clause of the Lisbon Treaty requires a parliamentary vote. Leading to the change in the Brexit process, the pound/dollar pulled up about 80 points in short-term.

Since then, there has been a major tax cut in the British media – the most shocking of which is the planning of property taxes, namely stamp duty, municipal tax and estate tax should be cancelled. This seems to be paving the way for the UK to leave the EU as soon as possible.

As of press time on November 6th, Beijing time at 18:40, GBP/USD reported 1.2517, which was 1.5% higher than last Thursday night. Next, in the context of economic and political uncertainty, what is the sterling? What does this mean for the global market and the renminbi?

"The pound has finally come to the end." FXTM China market analyst Zhong Yue told the "First Financial Daily" reporter, "The Bank of England sharply raised growth and inflation expectations, and the British High Court ruled that the parliament voted to leave the European Union, which led to the pound. The exchange rate soared to the 1.2500 mark and became the strongest currency.” He also revealed that he traded the euro/dollar currency pair last year, but this year he suffered a small loss due to the unexpected fluctuation of the pound. The current uncertain trend has challenged the trader’s experience and Psychological quality.

Sterling "big adventure"

Around 6 pm Beijing time last Thursday, the British High Court ruled that triggering the 50th clause of the Lisbon Treaty requires a parliamentary vote and said that the British government is allowed to appeal on the day's ruling. The pound plunged against the US dollar, up to 1.2475 at 8:00 that night, and then fell slightly; the UK FTSE100 index narrowed and turned flat.

There were also foreign media reports at the time, "Teresa May and others must now spread their hands and meditate in their hearts - what should we do now?"

After the High Court issued a ruling, British Trade Minister Fox said: "The government is very disappointed with the court's ruling and will carefully consider how to respond to the ruling." The British government also said it will appeal to the Supreme Court on the Brexit ruling, the government believes that "other countries The trade agreement with the EU before is likely to be transformed into a trade agreement with the United Kingdom. The implication is that the process of prematurely disrupting the Brexit has disrupted Teresa May’s plan.

Eurogroup Chairman Diesel Blom said that he does not want the British court's ruling to postpone the Brexit process.

In fact, before the withdrawal of the EU, the government has the final say or the parliament has the final say, has not been conclusive. The current Supreme Court of the United Kingdom has approved the parliament to vote on the withdrawal of the European Union, so the government's previous Brexit decision is likely to be overturned.

In this regard, some senior traders performed more calmly. "This is actually expected. As early as the end of the Brexit referendum, there is such an expectation," Sun Yu, chief trading officer of China Financial Group, told reporters that "there is always disagreement within the British Parliament." ”

An authoritative British media analysis said that the British Prime Minister’s first line of defense was to appeal to the British Supreme Court in early December in an attempt to overturn last Thursday’s ruling. Article 50 will open a two-year process of separation from the EU. If the appeal fails, May will face several months of conflict in the House of Commons and the House of Lords.

The mainstream view is that it is expected that the members of the upper and lower houses will not completely stop Brexit, but they will try to amend the legislation authorizing the initiation of Article 50 and push the Prime Minister to adopt a "soft Brexit" negotiating position so that the UK can stay in the single market and Within the customs union.

Speaking of "soft Brexit", it corresponds to the "hard Brexit" that triggered the collapse of the pound in early October. At that time, I thought that the pound would be temporarily safe after the Brexit. It is expected that the pound plunged 6.1% against the US dollar in early Asian trading on October 7, recording the lowest point since March 26, 1985.

Before Teresa May suddenly announced during the Conservative Party meeting that the UK would prioritize immigration control and secondly consider the EU's single market access. “Because of low-skilled immigrants, some Britons have been squeezed out of the labor market.” She was repeatedly interviewed in the media that the UK was “an independent sovereign state outside the EU”. This shows that the new prime minister, who has always been tough on immigration issues, is determined to take back border control from the EU.

This also means that if the government made a compromise under the judgment of the High Court, it also violates the British government's previous attitude - "There is no decision to withdraw or withdraw from the EU, so once you leave the European Union, you will enjoy it. Rights will also inevitably be lost."

Of course, there is still no lack of opinion that the benefits of Brexit greatly outweigh the costs. The British media recently broke out a heavy tax cut plan, saying that the plan gives a plan for property taxes, that is, stamp duty, municipal tax, and estate tax should be cancelled. The plan believes that these taxes are inefficient compared to the economic development after the Brexit. There is a view that this seems to be paving the way for the promotion of Brexit.

Temporarily welcome the "sweet period"

Regardless of how dazzling the political situation is, for traders, the pound is temporarily suffering.

“British Brexit is currently the main driving force,” said Richard Wiltshire, chief forex broker at ETXCA pital. “Any rally in the pound will be limited by uncertainty concerns.”

However, at least in the short term, "there are four factors that escort the rise of the pound." Zhong Yue told reporters.

First, the High Court ruled that the withdrawal of the Brexit procedure required a parliamentary vote. In addition, the British Parliament members supported the opposition to Brexit before the referendum at the end of June. The parliamentary vote added a new variable to the Brexit process. The British government can appeal in early December, but the chances of being rejected are high. "The news has caused the Europeans to hope to reignite and stimulate the pound to rise to a three-week high."

Second, the central bank also played an important role. Zhong Yue mentioned that the Bank of England kept interest rates and bond purchases unchanged on Thursday night, in line with expectations. “But the Bank of England no longer expects to cut interest rates again this year, and even hints that inflation is accelerating. At some point, the central bank may tighten monetary policy. As the pound depreciated sharply after the Brexit, the central bank also raised its 2017 growth and inflation sharply. Expectations. Compared with the statement since August, the Bank of England’s position is obviously tough.” It is undeniable that “the continued strong economic data of the UK has caused the Bank of England to further increase the probability of further easing, which also triggered the short-covering of the British pound. The pound further rose to the 1.25 mark."

Third, the devaluation of the British pound in a few months has itself stimulated the British economy. The UK's service industry purchasing managers' index for October was 54.5, the highest level since January. Zhong Yue told reporters: "The data shows that the UK economy has been strong after benefiting from the pound sterling. The pound has also benefited from strong UK economic data since it collapsed in October."

Finally, what has to be mentioned is the US election, whose uncertainty has caused the dollar to fall, which is also good for the pound. On October 28, the FBI FB I) restarted the investigation of the Democratic presidential candidate Hillary’s “mail door” incident, which led to a sudden change in elections. The market’s concerns about Trump’s victory over the stock market and the dollar pushed up the pound.

The renminbi is slowing down

Looking at the country, under this increasingly dynamic world structure, the changes in Europe and the United States have also had a large short- and medium-term impact on the renminbi.

Since the sterling "flash crash" in October, the US dollar index has been passively strengthened, and it has been approaching the 100 mark, which has intensified the pressure of RMB depreciation. The renminbi against the US dollar also fell from the 6.6 before the National Day to the current 6.754, and it was once closer to 6.8. However, the recent decline in the renminbi has slowed down.

Right now, the strong rebound of the pound has undoubtedly exacerbated the downward pressure on the dollar, which also gives the yuan a temporary respite. In addition, due to the FBI's restart of the “mail door” investigation, the US dollar fell. The central parity of the RMB on October 31 was raised by 154 basis points to 6.7641, the increase was more than one month. As of 18:30 on November 4th, Beijing time, the US dollar index has fallen below the 97 mark to 96.94.

In terms of the fundamentals of the renminbi, the current account and the capital account are the two “pillars”. Recently, the State Administration of Foreign Exchange announced preliminary data on the balance of payments in the third quarter and the first three quarters of 2016. In the third quarter of 2016, the current account surplus was 71.2 billion US dollars, an increase of 11% from the previous month; the non-reserve financial account deficit (including net errors and omissions) was 207.3 billion US dollars, mainly because domestic entities actively allocated external assets.

Ding Shuang, chief economist of Standard Chartered Bank Greater China, said in an exclusive interview with this reporter: "China's current account (ie, trade) has no problems. As far as capital is concerned, the kinetic energy of corporate capital outflow will gradually decrease, but The kinetic energy of the household sector to exchange foreign exchange may still put pressure on the renminbi.” Standard Chartered expects the US dollar to reach 6.3 to 6.4 in 2020, 6.75 at the end of 2016 and 6.78 at the end of 2017.

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