Daily Roundup – Markets review 19/03/2019

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Daily Roundup – Markets review

March 19th

A quiet start to the week saw political discourse and speculation over Central Bank action dominate in what limited FX volatility was seen. That could change today however with a modest uptick in terms of economic data, although so far as Sterling is concerned, Brexit is likely to carry far more weight than will be seen from the latest employment data.

Brexit took a dive off into the long grass yesterday after parliamentary protocol dictated that Theresa May couldn’t put essentially the same vote infront of MPs for a third time. The initial reaction was one of panic, pushing GBP noticeably lower in the short term, but losses weren’t sustained, as little overall has changed. The chances of a no-deal Brexit may be fractionally higher, but it remains seen as an outside risk. The bigger movement for GBP is likely to be seen on Thursday when EU leaders convene for a planned meeting, although Brexit is close to the top of the agenda.

UK employment data could provide a brief uplift for the Pound if average wage data comes in much higher than the 3.4% expected. The accompanying inflationary pressures here may be sufficient to put weight behind arguments in favour of a quick rate hike from the Bank of England, although Mar Carney has repeatedly said he won’t move until Brexit uncertainty is out of the way.

An improvement in Germany’s ZEW survey is unlikely to deliver much lasting upside for the common currency after the ECB’s Vice President yesterday reiterated the fact that a turbulent year lay ahead and inflationary pressures were unlikely to resume before the medium term. Some short term volatility may be seen, but that’s likely to be an opportunity for booking quick profits rather than the start of any longer term trend.

The DXY dollar index continues to sell off ahead of tomorrow’s FOMC verdict. Although dollar weakness has been building for almost two weeks now, there’s still a concern that regardless of what the Fed says, given the slew of economic data released at the end of last week and its failure to impress, there could be yet more downside coming for the greenback.

Technicals

The up channel formed by AUD/NZD over the last week is threatening a breakout on the downside, paving the way for a return to recent lows around 1.0300 then down to the 2016 lows at 1.0250.