Daily Roundup – Markets review 25/03/2019

Donald Trump

Daily Roundup – Markets review

March 25th

Markets are starting the week with a genuine struggle for direction. Firstly, Donald Trump has been cleared of collaborating with Russia over the 2016 election win, which should provide a boost for the US economy as a whole. However, the full report is yet to have been seen by US lawmakers and other questions remain unanswered over the President’s business activities. This could still flare up. Secondly, downbeat economic data from the US and Europe on Friday saw a yield curve inversion in US 10 year T-bills. This is seen as a classic warning signal for recession in the US, has been hitting Asian stock markets hard and may drive some risk off appetite.

The problem appears to be with these two factors landing at the same time, there’s something of a battle of wills taking place. The Japanese Yen ought to be benefitting from safe haven inflows and whilst this was the case on Friday and in the early part of the Asian session too, USD/JPY has been retreating in recent hours. The pair’s foray below 110 certainly didn’t last long.

One safe haven venue that is finding support at present is the Swiss Franc, with USD/CHF seeing some downside pressure in recent trade. This pair could well remain on the back foot, as it falls back into the down channel it has been plotting over the las couple of weeks.

Brexit warrants another mention and the debacle has the ability to inject fresh volatility into Sterling this week, although the biggest single factor in play here isn’t the UK’s ongoing relationship with the EU, but instead revolves around the political risk faced by Theresa May. Members of her cabinet are reportedly calling for her resignation, whilst she is being forced to make a decision over getting Brexit legislation passed that can only work by driving deep divisions through the Conservative party. No-deal is still on the table, but so is the risk of a general election. The accompanying uncertainty of the latter point has the potential to hammer an already weakened Sterling.


USDCAD is in an ascending triangle, with the potential for this to be sustained up towards the highs from early March of 1.3460.