Market Drivers November 13, 2018
Cable Rally Falters
German ZEW improves
Nikkei -2.04% Dax 0.48%
Europe and Asia:
GBP UK Average earning 3.2% vs 3.1%
EUR GE ZEW -24.1 vs. -25
It’s been a range-bound night of trade in the FX market with most of the majors consolidating at their recent lows after a massive drubbing yesterday.
EURUSD held support at 1.1225 most of the night with little newsflow to move prices as the squabbling over the Italian budget continued. On the eco front the ZEW survey printed slightly better than expected at -24 vs. -25 but had very little impact on trade as markets were content to hold bid after the selloff yesterday.
The move yesterday broke key support and did major damage to the bulls, but with no further momentum, for now, the EURUSD could be content to consolidate a bit and could even test the 1.1300 level from the downside if any progress is made on the Italian budget front.
Meanwhile, cable did its usual rollercoaster ride as the competing Brexit headlines yanked the pair like a yo-yo. We noted yesterday that 95% of the key Brexit negotiations appear to have been completed including the vital issues of a customs union and financial sector integration. Rather its the political disagreements that threaten to scuttle the deal. The hardliners with the UK government refuse to give way on the Irish border issue seeing the compromise as an affront to British “sovereignty”. This is especially ironic since Northern Ireland voted to remain in the EU.
In any case, the EU is unlikely to give in on the border issues as that would undermine the foundational principles of the union and it’s quite possible that politics will trump economics in this case leading to an unruly hard Brexit. For now, however, the markets continue to bet that cooler heads will prevail and cable continues to be a buy the dip trade.
In North America today the calendar is barren and range trading could be the order of the day but as always the trade will be headline driven and any positive news on the Brexit front could spur a quick reversal of yesterday’s flows.