The most recent news to greet the markets at the onset of this week is all about delaying
potential outcomes. Over the weekend the US president announced a delay in the
implementation of Chinese trade tariffs which were due to kick in this Friday- 1st March.
That date has now been pushed back to allow more time for the US and China to reach an
agreement on trade.
This side of the pond the same looks increasingly likely when it comes to Brexit as all the
latest talk surrounding this seems to be concerning a potential delay in the March 29
departure date. Indeed, within that itself the PM, Teresa May has already pushed back the
date of her next attempt at getting her plan through a ‘meaningful vote’- to 12th March
whilst insisting that 29th March is still live.
Meantime in Brussels the suggestion is to kick the entire can even further down the road by
delaying this until 2021. To take an entirely cynical view on all this, it looks like any
suggestion of a two-year hiatus from EU is nothing more than a deliberate repost to stymie
May’s obvious attempts’ at forcing them into some last minute compromise on the
Anyway, leaving all that aside, far from taking any of these latest developments as a
negative, the equity markets have chosen to accentuate the positive this morning and
moved higher in Asia overnight with more than 5% gains for the main Chinese bourses.
Those moves are having a positive impact across the board with the US Futures pricing in
gains later on as Europe opens up higher too.
What is not gaining this morning though is the dollar. The USD index has slipped back a little
more and the USDCNY has also broken down through that Fibonacci support level I noted
last week. Since peaking this year at 97.37 the week before last, the USD index has posted a
series of lower highs which doesn’t look especially positive in the short term and as you can
see in the chart below, the price looks like it’s headed for another retest of interim support
The main driver for the move backwards in the dollar generally is down to the GBP and the
EUR and more so the GBP as the GBPUSD takes another look at 1.3100 as I write. Naturally,
if there is a delay in the Brexit saga then that would surely be taken as a positive for the
pound. Furthermore, the GBPEUR is also retesting that 1.1540 level again this morning and I
repeat what I said about that last week- a break there could easily open up a revisit of levels
So, and as with the equity markets, kicking the can down the road on all these current issues
might be a short term positive for risk sentiment which in turn is not doing the dollar any
favours. However, it’s ultimately not that which decide where all these markets end up.
That will be determined by where all those cans finally come to rest as they surely have to
at some point.
Important Economic Releases Due this Week
26/02- 3.00pm US February Consumer Confidence Index
26/02- 3.00pm Fed Boss J Powell Senate House committee Testimony
27/02- 1.30pm Canadian January CPI Report
28/02- 1.00am Chinese February Manufacturing PMI reading
28/02- 1.00pm German February CPI Report
28/02- 1.30pm US Q4 2018 Final GDP reading
01/03- 8.55am German February unemployment report
01/03- 10.00am Eurozone Final February CPI reading
01/03- 3.00pm US February ISM Manufacturing Index