Brexit can kicked down the road
Anticipation sustains for the Brexit draft deal vote going into the fresh week with the British pound hanging on a line while market sentiment seen little changed on the back of trade developments.
The highly anticipated UK parliament vote on the Brexit draft deal turned out to be a vote to extend the time for consideration, though that appears to have done little to put off the market seeing both the British pound and the Euro still hanging near last week’s levels. GBP/USD just touch below last week’s highs, oscillating at $1.2930 levels while EUR/USD stayed above its 100-day moving average (DMA) going into the fresh week. The can is not kicked far down the road with UK prime minister Boris Johnson expected to seek a new ‘meaningful vote’ on his deal as soon as Monday with the countdown to the Brexit deadline. Whether this comes through will be one to watch and certainly for the cable still awaiting direction with bated breath.
As far as the IG client sentiment indicator is suggesting on the basis of retail contrarian, the earlier net long position which corresponded with the GBP weakness had significantly tapered off to the current neutral view on the back of the reduced hard Brexit expectations. This level of ambiguity on the outcome of the draft deal vote had seen to almost 50-50 long and short positions which also matches the near $1.30 handle situated at the midpoint of the $1.20-$1.40 fluctuation range since the Brexit referendum. Any breakthrough could finally see to a breakout of the 200-Week Moving Average.
Asia markets have seen to a mixed commencement thus far with little in the pipeline to alter risk sentiment from last week. US earnings out from last week had also been a mixed bag seeing the 15% on the S&P 500 Index that had reported thus far, delivering with 82% earnings beat and a smaller 62% sales beat. As it is, investors remain in anticipation of the US-China phase one deal signing into November with the happy talk continuing from both sides on the progress made. Interest had shown to be high from both sides in making progress, but most are likely cognizant that difficult issues remain ahead.
For the day ahead, however, watch China’s October loan prime rate release in an otherwise quiet Asia session. Brexit updates alongside Germany’s CPI will be ones to follow later in the day.
Friday: S&P 500 -0.39%; DJIA -0.95%; DAX -0.17%; FTSE -0.44%
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