Hard Brexit, Soft Pound

In a day characterized by multi-period highs, lows and new records, the UK’s currency was unable to recover from yesterday’s sell off despite attempts to reassure investors the country would avoid a ‘hard Brexit’. Sterling hit new 2 and 3 month lows against the Euro and the US dollar before recovering slightly intraday.

It’s not all bad news though, as the weakening currency has been a boon for exporters and the FTSE 100. The latter has marked a record-breaking 10 day streak of consecutive highs, closing higher on each trading day since Christmas. Investors not exposed to the currency will be rubbing their hands at the returns, especially since the index just marked its best annual performance relative to the EuroStoxx 600 in 30 years.

Records, Highs and First

Healthcare stocks helped the NASDAQ to an intraday high on Tuesday, Iraq plans to push crude oil output in February to an all-time high, the World Cup will be expanding to a record 48-teams as from 2026, and Xi Jinping is set to become the first Chinese president to attend the annual holiday World Economic Forum in Davos, Switzerland.

That’s four records in just one paragraph, which is – ahem – a personal record… Moving on.

Bitcoin and the PBoC

Bitcoin, the popular crypto-currency has tumbled almost 20% after a massive rally over the last few weeks. While Satoshi Nakamoto’s creation is notoriously volatile, the fall may be driven by increased scrutiny by Chinese regulators who want to ensure bitcoin is not used to facilitate capital flight.

Bitcoin trading 98% of bitcoin’s trading volume comes from China driven by fears of a depreciating renminbi. Suspicion that the virtual asset is contributing to outflows prompted the People’s Bank of China met with the country’s three largest bitcoin exchanges last week to exchange a few ‘friendly reminders’ about risk control and irregular practices.

Despite this, bitcoin investors believe that it is still highly unlikely that the virtual currency is facilitating large-scale transfers, quoting high spreads and caps on volume as the main hindrances. Chinese bitcoin platforms also require physical proof that links investors to a domestic bank account, meaning transactions are not anonymous.