Investors shrug off May’s “humiliating” defeat

May’s defeat nothing more than posturing in Parliament

Softer sessions in the US and Asia overnight appear to be taking their toll on European markets ahead of the open, with indices expected to open a little lower on the final trading day of the week.

As much as Brexit may feel like the most important thing in the world right now to those of us sitting in the UK, I don’t think the wider community is quite so caught up in all the play-acting and faux drama. Theresa May’s so-called humiliating defeat in Parliament on Thursday was just the latest in a series of symbolic gestures designed to give the allusion of weakness of the PMs deal unless Brussels offers more substantial concessions. It is in no way indicative of how MPs will vote at a minute to midnight when it matters.

This kind of political posturing has been a regular feature of the negotiations over the last couple of years and has been significantly ramped up in recent months as MPs have been given the opportunity to express their views and make statements in Parliament. I’m not sure it will be too effective in negotiations with Brussels but perhaps we’ll find out the closer we get to the end of March. It’s clear that the EU does not take the threat of no deal very seriously and moves like this are deliberately designed to force them to. I’m not convinced it will.

No news means no risk appetite

Will Xi involvement be the catalyst for a truce extension

Negotiations in Beijing are likely to attract more of the attention of the investing community as President Xi joins the talks in an attempt to deliver the kind of progress that will ensure a 60 day extension to the truce. A deal after only 90 days of talks was always unlikely making this the more realistic target from day one, something that if achieved will reassure investors.

Gold remains in $1,300/$1,320 range despite weaker dollar

The risk aversion we saw on Thursday in response to the weaker US retail sales data gave gold a little kick higher, with its role as a safe haven seeing it favoured. This was of course helped by a weaker dollar in response to the figures but gold remained in the $1,300 to $1,320 range as neither bulls or bears managed again to significantly seize the upper hand.

Trade talks continue as Trump vows to build the wall

Oil strongly pushing major resistance

Oil has previously struggled during previous periods of risk aversion but, like its fellow commodities, is fond of a weaker dollar and is continuing to respond to favourable reports this week, including Saudi Arabia’s commitment to cutting output by an additional 500,000 barrels per day by March. Brent and WTI are both now seriously testing a major resistance zone, around $65 and $55, respectively, the break of which could be the catalyst for another rally.

Oil (WTI and Brent) Daily Chart

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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.