Market Drivers January 29, 2019
- U.K. Parliament to vote on Brexit amendments
- AU NAB sinks
- Nikkei 0.06% DAX 0.63%
- Oil $52/bbl
- Gold $1306/oz.
Europe and Asia: - AU AUD NAB 2 vs. 11 eyed
North America:
- USD Consumer Confidence 10:00
It was another slow grinding night in FX as majors remained trapped in very narrow ranges for most of Asian and early European trade. Still, the dollar remained on the back foot with the euro pushing through 1.1450 as London came online.
The main focus of the day will be on Westminster as the U.K. Parliament gathers to consider a series of amendments that would make Prime Minister May’s Brexit deal more palatable for the majority of MPs. Among the many to be considered will be the Brady amendment that calls for an alternative to the backstop, although it remains so vague in specifics as to be nearly meaningless.
There is a strong chance that all the amendments may fail which would leave Prime Minister May at a standstill. The game of chicken between May and the EU rests on the idea that she can deliver a majority in the U.K. Parliament on her Brexit deal and then force the EU to amend the backstop terms in order to keep the U.K. in the customs union. For the EU's part, Brussels is betting that the utter failure of consensus in the U.K. Parliament will force a second referendum which will likely keep the U.K. in the EU anyway. With only eight weeks to go towards the deadline, the political pressure will no doubt ratchet higher, but the FX market seems unfazed as the consensus view is that there will either be a deal or a delay and those assumptions continue to prop up Cable for now.
Earlier in Asia today the Aussie dipped hard, dropping to a low of .7137 on news that the NAB business confidence fell to 2 from 11 the period prior. Business sentiment has clearly deteriorated on the slowdown in demand from China and the growing tensions on global trade. But the Aussie popped back to session highs as risk sentiment improved in Asia and hawkish comments from RBA board member Ian Harper added fuel to the short covering rally.
In North America today the only release of note is the Consumer Confidence report which is expected to remain steady at 88 from 87 the month prior. There is however a good chance that the number will miss given the turmoil over the U.S. shutdown. Still, the market will likely shrug it off as a one-off effect. USD/JPY has made several attempts to break 109.00 in the past 24 hours, but so far has held firm above that figure, and if U.S. equities turn positive, some short covering squeeze could be due.