Equities and forex market saw positive price action at start of the day on bullish momentum influenced by overnight Brexit related headlines. But UK AG Geoffrey Cox’s comments influenced a fresh dovish wave resulting in European equities and British Pound suffering sharp declines.
Summary: Global market is seeing positive price action in all major equity and forex markets across Asian and Europe. Hopes for progress in Brexit and last minute assurance from EU Juncker which PM May claimed is legally binding and necessitates UK & EU to work on replacing Irish backstop agreement by December 2020 boosted market bulls and influenced fresh wave of positive price action amid healthy risk appetite and risk on investor sentiment. Positive cues from US Wall Street also added strength to positive investor sentiment as European market was highly susceptible to influence from international markets. While Brexit optimism and news driven momentum facilitated positive opening of European markets and influenced a sharp upside move of GBP in broad market pressuring USD in broad market, late European market saw sharp fall in equities and British Pound made a nose dive to the downside ahead of UK parliament vote comments from Attorney General Geoffrey Cox. Cox stated that while the assurances reduce the risk of EU-UK being indefinitley struck in backstop agreement it doesn’t negate the possibility either. This caused fresh wave of dovish price action just ahead of US markets hours but is unlikely to have any major impact on price action in US Wall Street equities while price action of EURO & British Pound may see some fluctuations during American market hours depending on the outcome of UK Parliament vote.
Precious Metals: Precious metals are trading positive for second consecutive trading session today. While risk appetite remained high in broad market, subdued USD and caution ahead of UK Parliament’s vote on PM May’s Brexit deal underpinned demand for Gold and Silver in Asian and European markets. Further, dovish change in investor sentiment following comments of UK attorney general COX which negated momentum from yesterday’s headlines on last minute assurance from EU Juncker also added to demand for precious metals in broad market.
USD/JPY: The USDJPY pair traded with positive bias in Asian and early European market hours despite weak US Dollar in the broad market as risk appetite remained high in global market over news of last minute assurance from EU Juncker on PM May’s Brexit deal. However, caution ahead of UK parliament Brexit vote also influenced a steady demand for safe haven asset resulting in USD losing its positive edge ahead of key parliament meeting. Investors now await US macro data for short term profit opportunities as the pair is unlikely to gain directional bias until Brexit proceedings in UK parliament is under progress.
AUD/USD: The pair saw subdued price action earlier in the day owing to disappointing Australian macro data outcome and yesterday’s better than expected US retail sales data. But prevalent risk on investor sentiment and weak US dollar in broad market helped maintain positive price action in broad market. Investors now await US macro data outcome for directional cues as trading session moves forward for the day.
On The Lookout: The main focus of investors across the globe today is on UK Parliament’s vote on PM May’s Brexit deal. The outcome of vote is expected to be followed by discussion on further proceedings in regards to Brexit resulting in discussions extending to another session tomorrow. Meanwhile, the calendar is filled with multiple high impact macro data and the same is likely to influence short term price action in major forex pairs in global markets. Conflicting headlines over the last 24 hours has resulted in market turning dovish ahead of UK parliament session with all positive influence gained yesterday’s late night report of EU Juncker’s legally binding assurance for PM May’s Brexit deal which would necessitate UK & EU to find a replacement solution for Irish backstop agreement by December 2020. Now that the optimism on approval of PM May’s deal has been lost investors keenly observe headlines for further proceedings of Brexit. If lawmakers vote down May’s deal, lawmakers will meet tomorrow for a vote on proceeding forward with no-deal exit scenario and in case this decisions is also voted down then UK MP’s will meet again on Thursday to decide whether to vote delaying article 50 or push for second Brexit referendum resulting in Brexit topic remaining as main focus on investors across the week. US Wall Street equities are likely to trade positive across the day given high risk appetite in broad market and expectations for positive outcome in US Core CPI update today.
Trading Perspective: Caution surrounding Brexit proceedings is expected to result in range bound price action in forex markets ahead of headlines following UK Parliament vote while Wall Street equities are likely to enjoy positive price action.
EUR/USD: The pair saw positive price action across Asian and European market hours on positive cues from last night’s Brexit related headlines. Increased risk appetite among global investors and positive cues from US Wall Street and Chinese markets also added strength to EURO bulls but the pair saw a slight drop in price ahead of UK parliament vote on mixed UK macro data and comments from UK AG Cox which resulted in fresh dovish wave in broad market.Investors now await US macro data and UK Parliament Brexit vote for short term directional cues.
GBP/USD: The pair saw positive price action across Asian and European market hours on positive cues from PM May’s last minute tweaks to Brexit deal following legally binding assurance from EU’s Juncker. But comments from UK attorney general Cox which hinted that new tweaks doesn’t mean legal issues are completely resolved and mixed macro data from UK resulted in sharp decline of the pair. Investors now await US macro data and UK Parliament Brexit vote for directional cues.
USD/CAD: The USDCAD pair saw slight upside move following yesterday’s upbeat US macro data. However, it erased overnight gains and moved back near previous session lows in Asian market hours owing to rebound in Crude oil price in broad market. The pair has since maintained range bound price action awaiting US macro data update for directional cues. If US macro data schedule to release today has better than expected outcome it will boost sentiment surrounding USD resulting in pair gaining a bullish directional cue which will result in positive price action for rest of the week.