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Pound falls as Brexit deal hopes hang in the balance


Forex news from the European morning session – 22 February 2019

Headlines:

Markets:

  • AUD leads, GBP lags on the day
  • European equities slightly higher; E-minis up 0.4%
  • US 10-year yields down 1.3 bps to 2.678%
  • Gold flat at $1,323.76
  • WTI up 0.9% to $57.45
  • Bitcoin up 1.0% to $3,935


There wasn’t much notable action on the session as markets were lacking on critical headlines as traders and investors await the conclusion of US-China trade talks in Washington later today. The dollar trades mixed against the major currencies bloc as risk sentiment is slightly optimistic on hopes that a trade deal breakthrough will come about.

The pound was the key mover on the session as it fell as hopes of Theresa May bringing back a Brexit deal for a vote next week continue to fade and as more resignations come about from the Labour party. GBP/USD began the morning around 1.3030 before falling to a low of 1.3015 early on as the dollar also held firm.

But as we move towards North American trading, sellers are finding another gear as the Brexit saga will now be heading for a showdown next week between May and MPs who are bidding for a no-deal option to be taken off the table. GBP/USD now trades at the lows just under 1.3000.

The Canadian dollar saw some gains as oil remains underpinned in testing the 100-day moving average again. USD/CAD slipped from 1.3225 to a low of 1.3204 before trading back closer to 1.3220 now as retail sales data from Canada is the next key risk event at 1330 GMT.

The aussie is the best performing major currency on the day but sits in a trading range of just 35 pips against the dollar. That said, it is trading near the highs and has continued to do so around 0.7115 after China refuted the Australia coal-ban report yesterday.

The kiwi was the laggard as we began European trading following the RBNZ’s commentary that they may pursue rate cuts as they seek to raise bank capital requirements over the next 5-7 years. Once again, as mentioned earlier in the day, emphasis there should not be on rate cuts but on the phrase ‘next 5-7 years’. I mean, who knows how markets would look like then.

NZD/USD recovered from 0.6758 to 0.6780 as we began the session before extending its recovery back above the 0.6800 handle now as we wrap up the European morning.

Looking ahead, the main event markets will be looking at is the conclusion of US-China trade talks so expect that to steal the spotlight as we close out the trading week.

WCRS 22-02



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