Who Letwin The Dogs Out

It appears that since Pro-rogue One: A Star Wars Story maybe, the loss of trust between Parliamentary MP’s and the Prime Minister’s office has become an unbreachable chasm. MP Sir Oliver Letwin added an amendment to the Benn Act on Saturday preventing an “accidental” hard Brexit on 31st October if the Withdrawal Agreement Bill (WAB) had not passed through Parliament by then. Although PM Johnson appeared to have the numbers to adopt the new withdrawal agreement, even sans the DUP, Parliament does not trust him enough not to engage in some hard-Brexit chicanery after the meaningful vote, by delaying the WAB until after the 31st October.

The vote was cancelled, and the Prime Minister has duly sent an unsigned letter asking the EU for an extension; accompanied by a signed letter effectively saying the first had was sent with a legislative gun at his head.

The plot has thickened after the abortive Super Saturday, with Labour and the sidelined Democratic Unionist Party allegedly conspiring to insert a permanent EU customs union into the withdrawal agreement that will now be voted on either today or tomorrow. If passed it would set Brexit back to square one as it would be untenable to the government.

Europe may yet have a part to play as well. Although an extension will almost certainly be granted, it isn’t beyond the realm of possibility that “conditions” may be attached to it. An election or a fresh referendum spring to mind as an exasperated Europe despair at Westminster ever sorting this out themselves.

Sterling has dropped by one per cent to 1.2870 this morning on the last news. The damage limited by the fact that, despite more twists and turns than any other soap opera in history, a hard Brexit is now highly unlikely. Sterling traders can likely look forward to a choppy headline-driven range of 1.2800 to 1.3200 for at least the first part of the week.

Canada goes to the polls today with the result too close to call and a minority coalition government a virtual certainty. The ECB meets on Thursday with no changes expected to the “spray and pray” easing policy. Assistance from the fiscal side from European governments being as far away as ever. Thursday also sees US durable goods with the market fretting over signs of trade-war slowdowns.

The US earnings season continues this week after Wall Street closed with a whimper on Friday. Revelations that a Boeing 737-Max test pilot experienced MCAS problems on a simulator but thought it was a simulator fault; it wasn’t. The revelations torpedoed Boeing’s share price dragging Wall Street down. Otherwise, earnings have held up well in the face of trade-war worries. Industrial bellwethers such as Caterpillar report this week and they may change that rosy picture. Wednesday is looming as peak reporting for the week with a procession of heavyweights such as Amazon reporting.

Closer to home, Japans balance of trade has shrunk to Yen123 billion. Worrying both exports and imports have shrunk more than expected, suggesting the global slowdown hasn’t gone away.

China announces its 1-year loan prime rate today at 1030 SGT, which is expected to drop to 4.05% from 4.20% previously. No move will likely disappoint mainland stock markets which are banking on targeted stimulus from the central government to mollify the effects of the global slowdown.

Tomorrow, South Korea releases its PPI and Thailand releases its balance of trade. Both will be monitored for signs that the regional slowdown, exacerbated by the US-China trade war, is alive and well.

Brexit’s end-game (or not), and US earnings will dominate financial markets thoughts this week. Of the two, earnings should carry greater importance, but everyone loves a good cliffhanger to a British drama show.


Boeing’s dramas mostly dragged Wall Street lower on Friday, rather than weak US earnings, although a soft China GDP print did not help sentiment. That should limit the fallout in Asia today as we await the China Prime Loan Rate this morning.

The S&P 500 fell 0.39%, the Nasdaq fell 0.83%, and the Dow Jones fell 0.94%. The sentiment is evenly slit in Asia this morning with the Nikkei 225 cautiously higher by 0.22%, but the ASX 200, lower by 0.20%. Barring a surprise from China, that midset will likely pervade in Asia this session, as it awaits for more precise direction from Europe and North America.


Treasury yields fell on Friday as markets hedged possible weekend event risk. The Euro and GBP performed strongly as at that stage; a positive Brexit resolution looked on the cards with the UK Parliament vote. The dollar eased overall with the dollar index falling 0.34% to 97.27.

That Brexit sentiment has taken a hit today, with GBP falling from a close of 1.2980 to 1.2910 this morning. Euro is mostly unchanged at 1.1160. Around the region, AUD and NZD remain steady at 0.6855 and 0.6390, near their New York closes.

The ranges this morning imply that most of the action in currency markets regionally today will be confined to the GBP and GBP-crosses.


Oil had a relatively quiet session on Friday, easing slightly on the lower Chinese GDP and global growth fears. The growth fears look set to limit any gains in oil realistically, set against a supply/demand background where supplies globally remain ample.

Brent crude spot fell 1.0% to $59.50 a barrel, and WTI spot fell 0.65% to $53.70 a barrel. WTI has slightly by 0.10% in early trading, but both contracts are set for a quiet start to the week as we await market-moving inputs from other time-zones.


Gold had a non-descript session on Friday, closing almost unchanged at $1490.50 an ounce. The opening has been much the same in Asia with gold failing even to catch its usual risk-hedging tailwind on Friday.

Longer-term support and resistance continue at $1474.00 and $1520.00 an ounce, respectively. Until one of these levels broken on a daily basis, gold’s long slumber is set to continue.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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