Risk Assets Rally Ahead Of Further US/China Trade Talks

GBP Rises on Government Defeat in Parliament

The European morning session on Tuesday was fairly subdued, with a quiet data sheet, though there some notable developments. GBP rose across the morning as the market reacted to news that parliament has voted in favor of taking control of the Brexit process.

The government suffered yet another historic defeat yesterday as parliament will now hold indicative votes tomorrow indicating how it would like to proceed with Brexit. However, the votes will not be binding for the government and Theresa May has reaffirmed her opposition to holding a second referendum. Nevertheless, GBPUSD is higher this morning, breaking above yesterday’s 1.3246 as traders sense the prospect that Brexit might be extended further than we are currently looking at.

USD Weaker Ahead of Consumer Confidence Numbers

EURUSD is also a little higher today. The EUR is taking advantage of some USD weakness following last week’s late USD rally. USD posted a strong recovery following a dovish FOMC meeting. However, we have since seen a little softening in the greenback allowing EURUSD to climb back above 1.30. Looking ahead to today’s US session, traders are waiting on US Consumer confidence numbers.

Gold Prices Drop On Better Risk Appetite

Safe haven inflows had been supporting Gold and JPY at the end of last week as equities were coming off. However, a mild recovery in equities over the European morning today has seen gold prices dropping sharply. They are now challenging yesterday’s opening price of 1313.46. USDJPY is currently challenging the 110.36 level which is key local resistance. Monetary policy divergence still favors USD over JPY at these levels, though safe haven inflow has recently seen USD trading lower against JPY.

SPX500 Recovers on Trade Talk Optimism

After piercing below the 2799.11 level at the start of the week, the SPX500 has now made a solid recovery. It is currently knocking on the door of 2818.07 as the market displays optimism over the upcoming US/China trade talks due to take place in Beijing. News of the content of these talks will likely be a key driver of risk flows this week. The UK100 is also showing some upside today. However, for now, it’s still sitting below the key level of 7263.3 as the market awaits the outcome of tomorrow’s indicative votes in parliament.

Oil Prices Supported By Stockpile Drawdowns & OPEC Production Cuts

Oil prices have started the week on a solid footing also. Price is moving back above the 59.02 level which, for now, holds as support. Recent EIA data sheets have shown a continued drawdown in US stockpileswhich, along with OPEC production cuts, is keeping oil prices supported

Commodity Currencies Boosted By Oil

The moves in oil have been good news for commodity currencies this week too. Both CAD and AUD are rising against USD. AUDUSD continues to remain supported at the .7021 level with price once again challenging the bearish trend line from 2018 highs. USDCAD is now testing the 1.3377 level as support after failing to make it back up to test the recent March high around 1.3466.

Looking ahead today, we have only US Consumer Confidence on the data sheet. So, we are likely to see a quiet day’s trading, though a solid number should help keep USD supported once again.