Towards the end of last week the mood in the markets was lifted by the news that a Brexit deal was struck. The announcement boosted European equity markets in addition to driving sterling higher. Friday was a quiet day in terms of news flow and volatility was low as traders awaited the sitting of Parliament on Saturday.
Over the weekend, Prime Minister Johnson suffered a setback as MPs narrowly backed the Letwin amendment – lawmakers supported the move to avoid a no-deal Brexit. The Benn act kicked in, which stated that Mr Johnson must request an extension from the EU. Just when you thought British politics couldn’t become any more comical, Boris Johnson sent a letter to the EU requesting an extension, but deliberately left it unsigned. Mr Johnson sent a second letter to the EU arguing that an extension should not be granted, and that letter was signed.
At the back end of last week many of the Brussels bigwigs were trying to position it that the UK has only two options, accept the deal or its no-deal. It was reported in The Sunday Times the EU are considering offering the UK an extension up until February 2020 if the prime minister can’t get the support for his deal. The EU were talking tough, but seeing as Germany is teetering on a recession, a no-deal scenario is not in the bloc’s interest. Dominic Raab, the foreign secretary, claimed the government has the votes to "get it through", but it is likely to go right down to the wire.
A meaningful vote on the Brexit deal should take place today, unless the Speaker of the House, John Bercow, decides against the event. Even if Mr Bercow doesn’t allow the meaningful vote, MPs will have an opportunity to vote on the principal of the deal brokered by Mr Johnson on Tuesday. Sterling lost ground overnight on the back of the weekend’s events.
Stocks in Asia largely got off to a negative start but have since turned positive amid uncertainty of the US-China trade spat, in addition to the Brexit situation.
At the end of last week, European stock markets finished slightly lower as traders were a squaring up their positions on the run up to the Brexit deal vote was that scheduled for Saturday. Sentiment soured on Wall Street as heavy losses in Boeing as well as Johnson & Johnson impacted the Dow Jones, plus the S&P 500. Messages emerged at Boeing that indicated employees intentionally misled the aviation regulator in relation to the safety of the 737 Max aircrafts. While Johnson & Johnson had to recall baby powder as some bottles were found to have traces of asbestos.
It was announced that US vice president, Mike Pence, will make a speech on China on Thursday. Mr Pence is known to be an outspoken hawk on China, so traders were fearful the politician might play hardball to set the scene for the next round of US-China trade talks The US are still due to impose 15% tariffs on $160 billion worth of Chinese imports in December, so dealers are fearful Mr Pence will be wheeled out to take a tough stance against Beijing.
At 7am (UK time) Germany will release the latest PPI report and economists are expecting -0.1%.
EUR/USD – has been driving higher since the start of the month, and a break above 1.1164 might put 1.1249 on the radar. A break below the 1.1100 region, might bring the 50-day moving average at 1.1037 into play.
GBP/USD – remains in the recent aggressive upward trend and a break above the 1.3000 area might bring 1.3178 into play. A move lower might put the 200-day moving average at 1.2715 on the radar.
EUR/GBP – is still in the bearish trend, and a break below 0.8575 could pave the way for 0.8471 to be targeted. If it manages to hold above the 0.8600 mark, it might retest 0.8786.
USD/JPY – while it holds above the 50-day moving average at 107.20 it could target 109.31. A move back below the 50-day moving average might bring 106.48 into play.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.