U.K. pound rises as a no deal Brexit looks unlikely, yen slips as Japan’s machine orders collapse, Aussie dollar falls as Westpac sentiment reading collapses
Sterling rose marginally, versus several of its main peers during the early part of the London-European session, as a consequence of the vote scheduled to be conducted later on Wednesday afternoon. MPs will get a chance to vote down a no deal Brexit, effectively forcing Parliament to find an alternative exit mechanism.
However, there’s a complication to this scenario; this vote won’t rule out a no deal exit by default, as the U.K. is still scheduled to crash out in two weeks, on March 29th, unless a solution is found. The other alternative, to avoid a crash out, is voting for an extension of article 50 beyond the exit date. But the remaining E.U. 27 would have to grant that extension, which they’ll only grant for a specific reason, such as; a general election or referendum, on any actual withdrawal agreement reached.
Today (Wednesday) in the House of Commons, the U.K. chancellor of the exchequer, Philip Hammond, will deliver what’s termed his “spring statement”, an outline of the budget the U.K. will work to over the next twelve months. Depending on its content, how much he’ll apportion to various social sectors etc. could impact on both the value of sterling and the value of the U.K. FTSE 100. His statement begins at 12:30pm U.K. time, the details are carefully guarded, in order to prevent speculation through leaks. Therefore, if there are surprises broadcast, sterling could spike and whipsaw versus its peers, based on the general nervousness surrounding the value of the U.K. pound, witnessed over recent days.
GBP/USD gave up the majority of its Monday’s gains on Tuesday, once it became obvious that the meaningful vote 2 would fail in the House of Commons. And at 8:30am U.K. time on Wednesday March 13th, GBP/USD traded at 1.314, up circa 0.45% on the day, above the daily pivot point, threatening to breach R1. Sterling also made similar gains versus several other peers; EUR/GBP traded down 0.48% at 0.856, close to breaching the first level of support, S1.
Yen slipped marginally during the Asian session, as the latest machine orders for Japan came in significantly below the Reuters forecast. The figure came in at -5.4% month on month, whilst year on year, orders fell by -2.90%. Japan’s main equity index the Nikkei, sold off sharply during the early part of the Asian session, to then recover some ground, whilst JPY slipped versus several of its peers, in particular yen fell versus GBP and AUD. Analysts will now consider if this lack of machine orders, is indicative of a wider economic malaise in Japan, or simply a blip.
The Aussie dollar fell versus several peers, after a key and highly respected banking sentiment index, missed the forecast by some distance; the Westpac sentiment index came in at -4.8, versus the previous reading of 4.8. At 9:30am AUD/USD traded down -0.22%, whilst GBP/UAD traded up 0.49%.
The U.S. dollar traded down versus the majority of its peers during the early hours of the London-European trading session, after selling off marginally during the Asian session. At 9:15am the dollar index, the DXY, traded down -0.04%, just below the 97.00 round number/handle at 96.90. EUR/USD traded up 0.04%, whilst USD/JPY traded close to flat, at 111.32. USD/CHF traded down 0.10%, still close to parity at 1.000. Looking towards the New York open, futures markets for the indices were indicating a slight rise in the SPX of 0.02% and 0.04% in the NASDAQ.
Analysts’ and FX traders’ focus will turn to the USA at lunchtime, as the latest durable goods orders data is released at 12:30pm. For an economy which is circa 80% dependent on consumers’ spending, this calendar event registers as high impact, due to it providing an insight into consumers’ and businesses’ appetite to purchase durable goods, over and above more disposable goods.
The economic theory is quite simple; the more durable goods are bought, the higher the bullish sentiment of USA consumers and small businesses. The reading is forecast to come in at -0.40% for January, falling from 1.20% in December. Such a fall, if the forecast is met, could take analysts and traders off guard, causing the dollar to experience intense speculation. FX traders would be advised to diarise this release.
« Sterling stabilises after the U.K. government loses crucial Brexit vote by a huge majority. U.S. dollar falls versus major peers USA equity markets rise, WTI oil rises to 2019 high due to reduced inventories, sterling rallies as U.K. MPs vote to reject a no deal Brexit »