Caution Ahead of Brexit Update Limits Market Gains - The Industry Spread

Karthik Subramanian

Karthik Subramanian has been a professional trader and fund manager over the last 18 years. He is basically a software developer who made the transition to financial domain around 18 years back as the attractiveness of the financial markets proved too much for him. He lives in Chennai in India along with his wife and son. He began his career as a software developer in 1999 and then gradually moved into the financial industry as he began trading stocks in his pastime. He then moved into the financial markets full time and then shifted his focus to the FX markets due to the liquid nature of these markets. Since then, he has been trading FX diligently and his favourite pair are the EURUSD and EURJPY. Over the last couple of years, he has found blockchain to be of high interest and considering his background in software and finance, he has since assembled a team of highly talented developers who have since worked on a variety of projects like crypto exchanges and blockchain architecturing. Now, he balances his time between trading and commenting on both the FX and crypto markets. He has worked with many publications including FX Street and Finance Magnates, which has helped him gain experience and also recognition across the industry. He loves to write and this passion has helped him to reach out across the FX and crypto industry. Right now, he works on his pet projects in the FX and crypto industry and spends his time writing and managing his blockchain team and helping it to reach higher.

PBOC cut interest rate

Caution Ahead of Brexit Update Limits Market Gains

January 16, 2019

PBOC cut interest rateWhile stimulus from China to boost its economy brought in fresh wave of bullish momentum, caution surrounding brexit outcome in UK parliament limited gains.

Summary: Equity and forex instruments are trading positive across all key global markets today. This positive move in broad market is supported by headlines from China which erased most of dovish influence in market from yesterday’s disappointing trade data. News hit market that Chinese state council is taking measures to help boost economy while PBOC cut interest rate seeking strong performance of Chinese economy during first quarter to establish stimulus for meeting financial goals on 2019. All major Asian indices erased significant part of yesterday’s losses and closed with more than 1% increase in value. However forex market continues to trade range bound across all major pairs as caution ahead of Brexit parliament vote hinders bull’s momentum in currency markets. However broad based risk appetite is expected to continue influencing positive price action in all major markets across globe today as investors have most priced in possible rejetion of brexit deal in UK parliament.

XAU/USD: Gold continues to trade range bound with slight bearish pressure as profit booking activity following recent gains and increased risk appetite in broad market today limited demand for safe haven asset. However gold remains steady near monthly high’s as demand for gold(safe haven assets) in long term is high owing to all major geo-political and economic issues remaining unresolved.

AUD/USD: The pair continues to trade range bound inside weekly high and lows on news driven momentum, however a look at daily chart makes clear that Australian dollar has managed to find stable support and trade steady near last week’s highs hit on Sino-U.S. trade talk optimism which ended on positive note. While risk on trading action supported bulls rate cut by PBOC influenced a slight drop in price action today. However the pair managed to retain foot hold above 0.72 handle hinting strong fundamental support behind ongoing rally.

USD/JPY: While risk off trading activity yesterday supported US Greenback’s recovery, USD bulls took a breather as risk appetite returned to market following PBOC’s rate cut in order boost economic growth in China which combine with ongoing political strife in U.S.A continues to limit USD. Meanwhile investors caution around Brexit progress in European markets increased slight demand for safe haven assets which boosted demand for Japanese Yen which is considered as safe haven asset across today’s trading session so far.

On The Lookout: Investors major focus continued to remain on Brexit vote in UK House of Commons today. While investors have already priced in possible rejection of Brexit deal in parliament, they are on lookout for vote turnout. Some speculate that this could be worst government defeat in nearly a century while, others believe that a low turn out in rejection vote could mean that MP’s are influenced by EU’s attempts to support May’s deal and promise of clarification on Brexit backstop which could be first positive sign in months. Investors are also focused on US PPI & Trade balance data and speech from ECB Draghi, Fed members George & Kaplan which is expected to keep market highly volatile during American market hours.

ECB DraghiTrading Perspective: High risk appetite in broad market and event filled schedule are expected to keep markets highly volatile in both US Wall Street and global currency markets.

EUR/USD: Caution ahead of UK’s Brexit vote headline helped sustain slight recovery rally that USD bulls managed to trigger yesterday and this is weighing on EURO despite broad based risk appetite. The pair is expected to continue range bound price action ahead of US PPI update and ECB Draghi’s speech scheduled later today while bulls and bears continues to wage war for control of momentum.

GBP/USD: The British pound continues to trade positive ahead of Key Brexit vote in parliament and is expected to continue positive price action as market has already priced in parliament’s rejection of PM May’s deal. However the turn out of parliamentary vote will greatly affect price action as a borderline victory for opposing party suggest possibility for further negotiations and a deal being approved in UK ahead of March deadline.

USD/CAD: US Greenback continues to gain on broad based investor caution in European market hours, however the upside is limited owing to rebound in crude oil price action. Canadian Loonie is a commodity linked currency and a boost in crude oil price underpins Loonie which has left the pair to trade range bound ahead of speech from key Fed members and US PPI data. Hawkish comments from Fed could help USD regain momentum while reaffirming recent dovish comments would result in pair crashing back to monthly lows.

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