29th January 2019 Market Update
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🇬🇧 GBP – Today is shaping up to be a very important day in the grand scheme of Brexit, as Parliament are set to vote on Theresa May’s Plan B, which as previously mentioned is very similar to Plan A but with a promise to renegotiate the Irish backstop with the EU. It is this deal that May will order her MPs to support, as she attempts to replace the backstop with ‘alternative arrangements.’ The obvious issue with this is that the EU has already made clear that this is something they are unwilling to do. As a result, Plan B seems somewhat dead in the water, and as such, the focus will remain on the amendments that have been presented by MP’s over the past week. Of these, the most talked about is that of Labour MP Yvette Cooper which is seeking to extend Article 50 until the end of 2019, if a deal is not reached by February 26th. In terms of its likelihood of success, an extension seems possible given that the Labour Party have thrown their support behind it, thereby reducing the chances of a hard Brexit come the end of March, which would obviously see Sterling supported. Another amendment of note at stake tonight is the one put forward by Conservative MP Sir Graham Brady which is looking to remove the Irish backstop completely on the basis that May’s Plan B doesn’t go far enough by agreeing only to renegotiate it. In terms of the rate, this morning we have largely seen Sterling consolidate the gains it made last week as investors hold their breath for events later on today. For those of you looking to trade the outcome of the vote, FairFX’s dealers will be available late into the evening to help our clients take advantage of the added volatility.
🇺🇸 USD – US prosecutors have filed a number of criminal charges including bank fraud, obstruction of justice and technology theft against Chinese multinational Huawei and its CFO Meng Wangzhou, in a move that has the potential to derail the trade talks between China and the US. These events this morning have come ahead of Wednesday’s meeting which involves China Vice Premier Liu He meeting US trade representative Robert Lighthizer in Washington. As a result of the charges against Huawei, some analysts believe that the chances of a positive conclusion out of this week’s trade talks have since been diminished, but in the past, we have seen President Donald Trump intervene in the interest of keeping relations good between the two countries. Despite all of this, the US Dollar index remained fairly steady this morning, indicating that the last night’s events were yet to impact the market. This might have a lot to do with tomorrow’s Federal Reserve meeting where it is expected that interest rates will be kept on hold, but prior to which, traders are remaining cautious. Given that today is an also a quiet one in terms of data for the Dollar, the cable rate will be impacted most significantly by the Brexit developments later on tonight.
🇪🇺 EUR – Expectations had been for a fairly steady EUR/USD today due to a lack of catalysts for either currency to make any significant moves. However, this morning we saw the EUR/USD rate hit its highest level this week, despite the raft of poorer economic readings coming out of the Eurozone last week, which included its key constituents of Germany and France. In fact, this morning’s data shows some potential light at the end of the tunnel, as we saw French Consumer Confidence surprise on the upside despite the ongoing Yellow Vest (gilet jaunes) protests which had been predicted would cause a lower figure. Whether this positivity holds as the week goes on remains in question, as expectations remain tilted towards a soft Q418 GDP figure alongside subdued inflation releases out on Friday, but any upside surprises could help EUR/USD back towards the 1.15 area.
GBP: A big day for Sterling ahead of this evening’s vote on both Theresa May’s Plan B Brexit as well as the amendments proposed by MP’s in the House of Commons.
USD: US-China Trade negotiations have potential to be derailed after US prosecutors file criminal charges against Huawei.
EUR: French Consumer Confidence comes out better than expected, amidst data heavy week in the Eurozone.
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