Obsession with Brexit continues to dominate news and trading in Europe while the US/China trade talks continue but hopes for a bigger fix by G20 meeting seems unrealistic and as FOMC Powell’s speech continues to guide rates hike expectations into 2019, writes Bob Savage on Thursday.

All of which puts the risk-mood as mixed rather than bouncing.

There is a sense that volatility in all things has been overpaid and that we are grinding into the last bits of 2018 with a more balanced view apart from the UK uncertainty. If it wasn’t for Brexit, the story would be mostly upbeat today as Asia and EM equities bounced back.

Better China house prices, better Australian jobs, and after surprise hikes from Indonesia’s central bank and the Philippine’s as they battle back on FX devaluations – all that put the rest of EM on a solid foot with TRY and ZAR leading gains so far today.

However, back in developing markets, dissecting the worst-case outcomes for GBP seems to be the only thing to do – with 1.2550 the first line, then 1.20 for the bears while bulls have to get over 1.38 to be relevant. UK Prime Minister May loses 2 cabinet members (her Brexit Minister Raab being the headline) and now faces the leadership challenge threat from her own party. Her job was to negotiate a deal with the EU and then manage it through parliament.

Was she overpaid for the task? Few will be able to answer this or the effect on GBP until we see the reaction of Labor, the backbench Tories and the alternatives of no deal, her deal or something surprisingly different like another referendum as it tries to forge a path forward.

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