Artificial intelligence gives up on Brexit too, Via Reuter
If you are sick of trading the GBP at the moment, you are not alone. Even the computers have had enough. I came across this interesting Reuters article here which stated that the Algos which read the news can't cope with the sheer volume of Brexit headlines. For those who are unaware, news-reading algo traders are part of a larger move where machines have replaced people on the trading floors. The rationale is that costs are reduced and speed is increased. The problem is that Brexit is producing too many headlines for them to process. Reuters has been publishing upwards of 400 Brexit related headlines per day in recent weeks. I can personally vouch for this when covering ForexLive's European secession for a week at the start of the year I felt that we should re-name the site - Brexitlive.com. Bloomberg apparently added to the content really upping the ante and hitting up to 1000 Brexit headlines a day on some days.
Furthermore, the complexity of the UK Parliament have made it hard for the computers to cope, the poor things. Well at least there is some reassurance that even computers can end up being baffled by British bureaucracy and idiosyncrasies. It reminds me of Dickens book, Bleak House, which has the fictional legal case Jarndyce and Jarndyce as a critique of the British legal system. There are no official numbers on the amount of algo trading that goes on, but the Reuters article cited sources claiming around 10% of all currency trades were carried out by news-reading algos. However, for Brexit headlines they are being turned off.
So, with computers being turned off, and some funds stopping trading the GBP right now less volume is going through sterling at the moment. Looking at the daily chart you can see price coiling in anticipation of some market moving news (I mean really market moving, not 50 pips and a retrace). Cash volumes for sterling in February were around $65 billion and that was 35% less than the $100 billion traded before the Brexit referendum in June 2016. This is cited by CLS, a major settler of foreign exchange trades.
So, it seems more and more folks (and machines) are stepping to the sidelines and waiting for Brexit to be resolved, one way or the other. The best strategy seems to be to wait for the break and go with it. Of course if you can go with the main break, as early as possible, all the better for you. So, don't ignore all the headlines just yet. Of course, unless you are robot, and you have probably been switched off...
