Brexit-Based Euro Trade (w/ Joseph Trevisani)

TL;DR

Analyst Joseph Trevisani suggests going long on the Euro against the British pound due to political instability in Britain caused by Brexit.

Transcript

JUSTINE UNDERHILL: Welcome to Real Vision's Trade Ideas. Today, we're sitting down with Joseph Trevisani, Senior Analyst at FXStreet. Great to have you back here. JOSEPH TREVISANI: Thank you. It's nice to be here. JUSTINE UNDERHILL: So, you've been on about half a dozen times in the past year going short the Euro. And now you're here to go long t... Read More

Key Insights

• 🤩 The uncertainty surrounding Brexit and the ongoing political turmoil in Britain are key factors driving the trade analysis.
• 😮 The Euro has been rising sharply against the pound due to the political instability in Britain.
• 🌍 Trevisani expects a brief pullback in the Euro-Sterling exchange rate before the Euro strengthens against the pound in the medium to long-term.
• 🇪🇺 Factors such as the European economy, European election results, and the actions of the European Central Bank may also influence the trade.

Questions & Answers

Q: What are the main factors contributing to the current political instability in Britain?

The main reason for political instability in Britain is the unresolved issue of Brexit, with the country remaining divided on the matter. The lack of a majority for either choice and the conflicting opinions of the governing elites and media further contribute to the uncertainty.

Q: What event would cause you to change your position on this trade?

If Boris Johnson refuses to accept the Prime Ministership or if the populist candidates running in the European elections face significant defeats, it could impact the trade. These events would likely introduce new uncertainties and potentially shift the dynamics of the Euro-Sterling exchange rate.

Q: Are there any other market forces besides politics that can influence this trade?

The European economy's performance and any potential changes in leadership in countries like France and Germany can have an economic impact, which would influence the trade. Additionally, the actions of outgoing European Central Bank President Mario Draghi may also be watched, although it's unlikely to significantly affect the trade.

Q: Why trade the Euro against the pound instead of the dollar against the pound?

Trevisani believes that the European elections and the Brexit situation will have a stronger impact on the pound against the Euro compared to the dollar. Additionally, the pound-dollar currency pair is known for its extreme volatility, making it riskier for longer-term positions.

Summary & Key Takeaways

• Joseph Trevisani believes that the British pound will weaken against the Euro due to ongoing political turmoil in Britain, primarily related to Brexit.

• The recent sharp rise in the Euro against the pound is attributed to the uncertainty surrounding Brexit and the lack of a clear path forward for Britain.

• Trevisani expects a slight pullback in the Euro-Sterling exchange rate before going long on the Euro, with a time horizon of up to three months.