Market Drivers June 21, 2017
UK PSNB in line
Slight risk off in the markets
Nikkei -0.45% Dax -0.70%
Oil $43/bbl
Gold $1247/oz.

Europe and Asia:
GBP UK PSNB 6B vs. 7B

North America:
USD Existing Homes 8:30

It’s been an exceedingly quiet night of trade in the FX market with majors trapped in tiny ranges amidst very little newsflow to move the markets.

The one exception to that rules was cable which managed break below the 1.2600 level making fresh multi-week lows. The UK eco data was neutral with PSNB coming in slightly better at 6B vs. 7B eyed, but market’s focus is strictly on politics as negotiations continue to proceed between Tories and the ultra-conservative DUP party.

With no discernable progress yet in talks, the market is becoming worried about the prospect of a minority government and Ms. May’s ever so tenuous hold on power. Coming as this does, at a time when UK government must make a concerted effort at Brexit negotiations, Ms. May weakened state could not have come at worse time especially if the negotiations with DUP result in a much confrontational stance on Brexit which is sure to be met with rejection by EU.

The air of uncertainty has turned sentiment against cable and the pair is now in sell the rally mode until the market gets better clarity on the political conditions in UK. Next week the UK eco calendar remains dormant, but if the eco data starts to falter the decline in cable could take it well below the key 1.2500 support level.

Elsewhere, the focus today in US will be on Existing Homes data. Which has seesawed all year long. The market anticipates a decline of -0.5% versus a drop of -2.3% the month prior, but if the number prints worse than expected it’s likely to drag USDJPY below the 111.00 figure as US yields once again compress. With housing in a slowdown, the Fed will have to rethink its tightening policy and that in turn could further downward pressure on the buck.