Markets await the next political move
The pound held steady at the start of what could be a volatile week, as the weekend failed to produce neither more MP resignations on Brexit, nor a challenge to PM May’s leadership. That may not remain the case as this week progresses, with market speculation suggesting members have collected enough Tory members’ letters to mount a challenge, but may struggle to accrue the required number of votes in parliament to win the vote of no confidence. Without that, an unsuccessful challenge would leave May immune to any further attempts to oust her for 12 months.
GBP/USD was confined to a tight range, despite the lack of news and the release of weaker economic data. The Rightmove house price index fell 1.7% m/m in November, the biggest monthly decline in three months. GBP/USD is currently holding at 1.2838, with the 55-hour moving average, now at 1.2846, acting as a near-term barrier to the upside since last Thursday.
NOTE: Leveraged funds’ positioning in GBP turned net long for the first time since the week ending June 26, according to the latest data snapshot as at November 13 from CFTC, published last Friday.
GBP/USD Hourly Chart
Souring US-China relations hit sentiment
The PBOC dropped the USD/yuan fix by 132 points to 6.9245, the lowest since August 11, but USD/CNH opened unchanged from Friday’s closed and pushed higher during the morning session as risk appetite slid. The FX pair looks poised to register its first up-day in five days. The weekend souring of US-China relationships dominated market direction and sentiment in Asian trading, with most equity indices in the red. China shares lost 0.36% as the Australia200 index fell 0.59%. US futures indices are all pointing to a lower open, with losses averaging about 0.35%. USD/JPY slipped 0.15% to 112.67 on safe-haven yen demand, while the Aussie was under pressure.
NOTE: $950m of USD/JPY FX option puts with strike at 112.50 expire today, according to DTCC data
USD/CNH Daily Chart
The APAC meeting in Papua New Guinea failed to agree on the wording of the joint communique for the first time ever. US Vice President Pence said that the US was in no rush to solve the tariff dispute and the US has no intention to end tariffs on $250 billion of Chinese goods until China “changed it ways”.
There were some minor newsbytes on stimulus packages, with Xinhua News reporting that authorities in various regions had pledged to support private companies, tapping in to a capital pool of about 35 billion yuan (US$5.04 billion). Beijing’s mayor said the city government plans to open up 100 billion yuan worth of projects to private capital. These measures had little impact on markets.
Nothing to impact markets on the data front
The data calendar is almost bare, with Euro-zone current account data from September the major item. Fed’s Williams is scheduled to speak during the US session.
The full MarketPulse data calendar is available at https://www.marketpulse.com/economic-events/
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