- Markets welcome Trade/Brexit positive news over the weekend.
- The EU nears a three-month Brexit extension, US-China progressing over the trade deal.
- The UK Parliament Brexit vote is in focus for now.
Forex today witnesses a risk-on sentiment backed by the weekend news concerning the Brexit and the US-China trade negotiations. Adding to the optimism is the United States’ (US) claim to have killed a major terrorist. On the contrary, change in Argentinean politics, followed by immediate alterations in withdrawal policy, kept the risk tone under check.
As a result, the US 10-year treasury yields rise 1.815% by the press time while Asian stocks, as indicated by MSCI’s index of Asia Pacific shares ex-Japan, also follow the suit with 0.60% gain. In a magnified reaction, Bitcoin extends its recovery to regain a $10,000 mark. An additional reason behind the Cryptos’ surge could be the statement from the People’s Bank of China’s (PBOC) that said commercial banks should step up blockchain applications. PBOC comments come three days after Xi said China should accelerate the adoption of blockchain technology.
At the currency front, Euro (EUR) struggles to justify the Brexit extension and trade positive news while the British Pound (GBP) benefits from the same ahead of the key Parliament vote. Further, Antipodeans await fresh clues whereas safe-havens drag down with Oil amid the overall US Dollar (USD) strength.
Main Topics in Asia
Key Focus Ahead
While second-tier activity numbers from the US could offer an intermediate momentum to markets, investors will be keen to know how the British politicians behave to the Prime Minister (PM) Boris Johnson’s motion supporting a snap election on December 12, 2020. It should also be noted that even if the European Union (EU) is less likely to respect the French push in allowing a shorter Brexit extension, a formal announcement of the same is still pending and can reveal and surprises. Also, Rabobank’s analysts anticipate the motion carries fewer odds to pass through the Parliament as they say, “As such, and just as pertinently, will PM BoJo get his December election or not? The greater likelihood is not, as Labour appears to be desperate for an election – just not now – although the Lib Dems may be prepared to allow one given they see this as a way to prevent any further movement towards Brexit in the short term. (Though what do they think the election campaign will be about? The price of cheese?).”
EUR/USD has snapped its longest winning streak since January 2018 with a 0.81% drop last week. The pair has violated key ascending trendline support. Trade optimism may bode well for the EUR, but Brexit uncertainty will likely cap gains.
GBP/USD benefits from the news that the EU is ready to allow a three-month Brexit extension to the UK. French push for a shorter extension mostly ignored, no renegotiation of the deal permitted. A formal announcement and the UK’s response will be closely observed for fresh impulse.
The USD/JPY pair has continued to consolidate at the upper end of its October range. The major pair has been confined to familiar ranges soaking up the monumental risks in geopolitics.