Cable at 7 Month Lows as Brexit Vote Looms

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Market Drivers June 20, 2018
Cable at 1.3150 ahead of Brexit vote
Risk flows return
Nikkei 1.24% Dax 0.34%
Oil $65/bbl
Gold $1273/oz.
Bitcoin $6600

Europe and Asia:
No Data

North America:
USD Existing Home Sales 10:00

All eyes were on UK Parliament today as the House of Commons was expected to take up the House of Lords resolution that interjects a Parliamentary will into any Brexit negotiation should PM May government fail to come up with a deal.

While the spirit of the legislation was actually bullish for cable as it tried to ensure a soft Brexit, the bill was seen as an assault on PM May’s sovereignty to negotiate a deal and she vehemently opposed the bill. The outcome of the vote which was due for consideration at 1830 GMT was up in the air and the uncertainty added to pound’s woes sending sterling to fresh 7 month lows at 1.3148.

With no eco data on the calendar FX trading, today was driven risk flows, political considerations and central bank speak. With most of the central bankers gathered at an ECB conference in Sintra, a few remarks hit the euro as well. The pair plunged to 1.1535 on comments by ECB’s Nowotny that he saw euro depreciating against the dollar.

Given the lack of inflation in the euro area and the escalating trade war rhetoric from Washington DC, ECB policymakers appear to have made a calculated effort to lower EURUSD exchange rate as an offset to any tariffs the Trump Administration may consider. The pair, therefore, remains vulnerable to further selloffs with shorts still gunning to take out stops at the key 1.1500 level.

In North America, the only data point of import is the Existing Homes sales data due at 1400 GMT with market anticipating a slight uptick from the month prior. If the number meets the consensus it could help stabilize USDJPY and push the pair back towards 110.50 as fears of US housing slowdown due to higher rates would be allayed. However, any drop in the number could send the pair right back below 110.00 and resume the risk off selling we saw yesterday

Boris Schlossberg
Managing Director

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