Daily Roundup – Markets review 12/03/2019

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Daily Roundup – Markets review

March 12th

 

Yesterday was all about what Brexit might deliver for the Pound, and the currency certainly didn’t fail to deliver. Sterling saw its biggest one day gain over the greenback since January 2017 with a similar pattern playing out against the Euro, but further volatility lies in store.

The rally was cemented off the back of news that fresh concessions – or guarantees – over the Irish border backstop had been secured. This however comes with two caveats. The European Commission have said explicitly that this is the last opportunity to change what’s on the table. On top of this, because of the late hour of the announcement, lawyers haven’t digested the detail fully yet. Today, the Attorney General, the UK’s top lawyer, will provide his view on just how enforceable these new clauses would be. His comments are likely to help steer wavering politicians ahead of tonight’s vote which is due some time after 7pm GMT. Expect further GBP volatility as a result.

Just to recap, if the government win tonight’s vote then the UK leaves the EU as planned in just over two weeks time. A loss for the government would see MPs vote on leaving without a deal tomorrow – unlikely to be passed – then on extending the Brexit process on Thursday – likely to be passed. A loss for the government today also brings with it the added complication of political risk, as Theresa May’s position may well be untenable if she was to lose. This in turn could run the risk of seeing a general election, bringing more uncertainty to Sterling. Another 300 pips in either direction by the end of the day should surprise no-one.

Elsewhere there has been some news of progress in US – China trade talks. This seems to be driving some risk sentiment and is helping the Aussie dollar nudge its way ever so slightly higher. The slump which started with the release of poor Australian GDP data almost a week ago is now close to having been fully reversed, although if the trade talks collapse then expect a prompt reversal here.

Technicals

There’s an up channel now formed on AUD/CAD, which has also recently found support at the 23.6% Fibonacci retracement. Look for the up channel to continue as far as the 38.2% retracement around 0.9550, a level which also provided resistance in January.