Brexit and the bitcoin boom

Sterling’s performance since Theresa May pulled off a surprise deal with EU negotiators has been lacklustre at best. That it sank below $1.34 tells you what the market thinks.

At best, this is just the end of the beginning for Britain’s extraction from the EU, and the pound is condemned to track the ebb and flow of confidence in UK politicians to achieve a good outcome for the UK.

The PM will sell the deal to Parliament this week, and we assume the 27 EU states will give permission to shift talks to phase 2. As events unfold we could see sterling at least trouble September’s high above $1.36 and levels not seen since last year’s referendum.

Away from Brexit, the big three central banks all report this week. A 25 basis-point increase in US interest rates is already baked in and new tax cuts should underpin a strong jobs market and economic growth.

Despite low inflation, policymakers will want to squeeze in at least two further rises in 2018, if not more. There’ll be much less activity at the Bank of England and ECB where rates will not move on Thursday.

There’s never a dull moment where cryptocurrencies are involved. Introducing a bitcoin futures contract in the US gives professional investors and institutions an easier route in, and a fresh surge in value indicates pent up demand.

Anything that adds to the asset’s accessibility and legitimacy and reduces security risk often associated with cryptos will improve its credentials as a tradeable asset and so grow the pool of potential investors.

Already, rapid and substantial gains on cryptocurrency exchanges have drawn in even seasoned investors, who are now earmarking some portfolio cash for bitcoin. Opportunities to profit from such extreme market conditions, akin to the dotcom boom, are rare indeed, but inevitably come loaded with risk.

However, the music may have much longer to play on this one than people think.

After months of underperformance, BAE Systems (BA.) has given the defence sector something to cheer. It’s taken years to get a signature from the Qataris for 24 Typhoon fighter jets, but we’d already been softened up for Sunday’s $5 billion deal back in September, which explains the limited reaction Monday morning.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.