September 5, 2019 – Global Monetary Alert. GBP and euro at cliff edge: beware the trap of short squeezes triggered by Brexit delay and US economic weakening

Dr. Brendan Brown

EXECUTIVE SUMMARY:

New evidence that the economic downturns in Europe, Asia and Latin America, are impacting now the US (ISM in August below 50) has checked the US dollar.

This situation together with UK Parliament having some “success” in blocking a “no deal Brexit” on October 31 has brought a short squeeze on US dollar bullish positions, most acute for the British pound. The Canadian dollar also got a bid from a remarkably bullish and implausible assessment from BoC.

Bottom line: the pound short squeeze and more broadly the euro modest bounce mask should not blind us to how near both currencies are to a cliff-edge. In the UK the chances of a Far Left government have risen

A crisis of democracy in the UK, a faded prospect of a rapid US deal, and European banking woes buttress the cliff-edge concerns.

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