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We just have a question here from Daniel asking why the comments from the French Finance Minister yesterday didn’t really move the market and why we didn’t see the Pound drop on the news. Now, just to remind you guys, we had a comment from the French Foreign Minister saying that Brexit talks are going badly and deep differences remain.
Now this is a good example, Daniel, of why we always focus so much on the freshness of news. You see, when news breaks, it’s mostly going to have an impact if it is new news, right? So something that the market doesn’t know already or news that basically changes the market’s current expectations.
So looking at the Pound on Tuesday, of course, we had that big move to the upside and that move to the upside was due to news that the EU might be willing to drop the hard line stance on fisheries, which we know has been a major point of contention between the two sides and the markets bought the Pound on that new and fresh news.
Then yesterday, of course, the big Pound mover was the release from the UK that basically, let’s just go down to that release in the terminal, there we go, was this release from the Brexit negotiator Frost saying that the EU needs to evolve its position because the mandate in key areas is just not likely to be able to reach an agreement between the two sides and they said that the policy in the EU’s mandate isn’t one that they can agree to.
Now the reason why this was so important is that it showed that the positive comments from the previous day basically fell on deaf ears in the UK camp and the UK is still sticking to their hard line stance and that the two sides are still very far away from any type of agreement.
Now these two comments, both the one from the EU and the UK side, was important as the deadline to decide an extension is basically the end of June and PM Johnson has threatened previously to walk away if they can’t make any progress until then. S
o this was a clear tradable news item yesterday. So going back to the comment from the French Foreign Minister, let me just quickly turn the squawk down, so going back to that announcement from the Foreign Minister, just quickly get that one on the screen, saying that differences remain, let’s just quickly find that one, differences remain and Brexit talks are going badly, going back to this announcement, the first question we need to ask is was this new information?
And the answer is not really, right?
So we already knew this before the announcement from yesterday, we actually even knew this before the EU’s announcement from the prior day. So it was basically just reiterating something that the markets already knew and secondly, being the Foreign Minister, he is important but his comments won’t be as closely watched as comments from Macron or Merkel or Johnson or the main negotiators on both sides, which is Frost on the UK side and Barnier on the EU side.
So when you’re evaluating these types of news events, always ask yourself whether this is new information or not and then of course, if it is new, is it significant enough to really move the markets?