Market Drivers January 29, 2019
UK Parliament to vote on Brexit amendments
AU NAB sinks
Nikkei 0.06% Dax 0.63%
Europe and Asia:
AU AUD NAB 2 vs. 11 eyed
USD Consumer Confidence 10:00
Another slow grinding night in FX as majors remained trapped in very narrow ranges for most of Asian and early European trade but the dollar remained on the back foot with euro pushing through 1.1450 as London came online.
The main focus of the day will be on Westminster as UK Parliament gathers to consider a series of amendments that would make PM May’s Brexit deal more palatable for the majority of MPs. Among the many to be considered will be the Brady amendment that calls for an alternative to the backstop, although remains so vague in specifics as to be nearly meaningless.
There is a strong chance that all the amendments may fail which would leave PM May essentially at a standstill. The game of chicken between May and EU rests on the idea that she can deliver a majority in UK Parliament on her Brexit deal and then force the EU to amend the backstop terms in order to keep the UK in the customs union. For EU part, Brussels is betting that the utter failure of consensus in UK Parliament will force a 2nd referendum which will likely keep UK in the Eurozone anyway. With only 8 weeks to go towards the deadline, the political pressure will no doubt ratchet higher, but the FX market seems unfazed as the consensus view is that there will either be a deal or a delay and those assumptions continue to prop cable for now.
Earlier in Asia today Aussie dipped hard, dropping to a low of .7137 on news that the NAB business confidence fell to 2 from 11 the period prior. Business sentiment has clearly deteriorated on the slowdown in demand from China and the growing tensions on global trade. But Aussie popped back to session highs as risk sentiment improved in Asia and hawkish comments from RBA board member added fuel to the short covering rally.
In North America today the only release of note is the Consumer Confidence report which is expected to remain steady at 88 from 87 the month prior. There is however a good chance that the number will miss given the turmoil over the US shutdown. Still, the market will likely shrug it off as a one-off effect. USDJPY has made several attempts to break 109.00 in the past 24 hours, but so far has held firm above that figure, and if US equities turn positive, some short covering squeeze could be due.