Quiet midweek eyed ahead of May’s Brussels visit

Brussels prepares for May’s visit on Thursday

It’s unlikely to be the most exciting day of the week in financial markets but that hasn’t stopped them jumping around recently, with various political and economic stories making for a volatile environment.

From a UK perspective, the key date this week is tomorrow, as Theresa May heads back to Brussels in the hope of convincing the EU to revisit the backstop issue that has so far prevented her deal getting through Parliament. I can only hope, for her sake, that she turns up with detailed “alternative arrangements” that interest rather than frustrate her counterparts in the EU, as her vague requests have in the past.

Unfortunately, I’m not particularly confident and think it will likely be another anti-climax that results in May returning to parliament with plan C that somewhat resembles both plan B and plan A that preceded it. Depending on what exactly their alternative arrangements are, this could be a test of just how feasible Brexiteer plans are for the border, having repeatedly slammed May in the past for not pursuing other solutions.

President Trump’s SOTU delivered lots of bipartisan moments but will unlikely see anything passed

Stronger dollar not deterring Gold bulls

Gold is continuing to hold firm despite the recent rebound in the US dollar putting it under some pressure. A stronger dollar is typically bearish for gold but at the moment, we are seeing some resilience even as the greenback makes steady gains.

Gold Daily Chart

The break above $1,300 was clearly a very bullish move and traders are reluctant to cave under any immediate pressure. Even $1,310 is holding firm currently, we’re yet to even properly test $1,300, or come close to it. I don’t necessarily expect that to last but if we’re seeing such a fight at these levels then I would be surprised if we didn’t see an even more fierce defence of $1,300.

Gold steadies after brief retreat, investors eye State of Union address

Oil pares losses after inventory data

Oil is trading a little higher this morning, paring losses incurred on Tuesday as API reported a larger than expected inventory number. The number was only a little higher than analyst expectations and much of the downside in crude came prior to the release, which unless it came in anticipating of a higher headline number would suggest traders were unmoved by the increase.

API Crude Oil Stocks

What is potentially more concerning for oil bulls is that this is the third consecutive increase in stocks, which is expected to be confirmed by the EIA report later today. Still, with OPEC and its allies seeking to gradually reduce the stock and US oil rigs falling in this low price environment, this downside pressure on WTI and Brent may not last. A significant break above key resistance – $55 and $65, respectively – may still elude us but I’m not yet seeing much appetite for prices to burst in the other direction. It may simply be a case that record US output and these inventory builds are keeping a cap on prices for now.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.