Buck Boosted by US Yields

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Market Drivers March 14, 2019
Pound remains bid in post-UK Parliament vote
US yields help USDJPY clear 111.50
Nikkei -0.02% Dax -0.45%
Oil $58/bbl
Gold $1300oz.

Europe and Asia:
EUR GE CPI 1.5% vs. 1.6%

North America:
USD Weekly Jobless Rates 8:30
USD Nee Home Sales 10:00

It’s been a quiet night of consolidation in FX with pound holding on to most of its gains after the UK Parliament yesterday rejected the no-deal Brexit option by just 4 votes. The result puts UK squarely on a path of extension and further negotiations and removes the existential threat of spinning out of the single European market without a customs union.

Ironically enough, PM May’s deal which has been rejected twice by the Parliament will now look as the most viable option, unless UK Parliament decides to scrap the Brexit idea completely and opt for a second referendum which would take at least 6 months to prepare. There is enormous pressure on UK politicians to remove the enveloping uncertainty in UK business which has caused investment flows to come to a grinding halt and PM’s deal may be the only immediate solution for the present situation.

Cable raced to 1.3300 in the aftermath of the vote and has managed to remain bid above the 1.3250 for now and could push through the 1.3300 figure once more if the UK Parliament votes to extend the Article 50 deadline later today. The consensus view is that if the UK does finalize on a soft Brexit deal cable should move to 1.3500-1.3700 area as a result.

Meanwhile, in Asia, JGB yields declined with 10-year now at the lowest level since 2016 and that has put a bid into USDJPY which popped from the 111.00 figure to trade to a high of 111.72. In North American trade today the market will get a look at weekly jobless claims and New Home Sales which are expected to remain steady from January. Housing has been a particular weak spot in the US economy over the past year, but the recent decline in US rates could prove to be stimulant to the sector. If the data prints better than expected, it could provide the catalyst for US bulls to take the pair through the 112,00 level where it has stalled several times before.

Boris Schlossberg
Managing Director

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