tIt was “risk-on” in Asia, overnight. China announced plans to cut taxes, reduce the burden on small firms and increase spending. The Peoples Bank of China (PBoC) said it would keep liquidity “reasonably ample.” Traders liked what they heard. The commodity currency bloc rallied, as did EURUSD and GBPUSD. The positive risk sentiment lifted USDJPY from 108.14 to 108.74. Nevertheless, the price action was contained within yesterday’s ranges, and ahead of the UK parliament vote on Brexit, it was just noise, and short lived.
There is US data scheduled to be released today, but the ongoing government shutdown may keep it on the shelf. However, there won’t be a shortage of Fed speakers. The Brexit vote is scheduled for 2:00 pm and that will put a damper on trading until then.
GBP
UK Prime Minister Theresa May is expected to lose today’s vote, and according to SKY news analysts, she will lose by 226 votes. If so, there is a litany of possible consequences which include Ms May’s ouster, or resignation. There could be a “Plan B”, or there could be a new referendum. Brexit could get delayed. GBPUSD could rally, especially if the vote is close, squeezing weak short positions, but would need to decisively break the downtrend line from May which is at 1.3060, to shift the focus to the topside.
EUR
EURUSD retreated from its overnight peak of 1.1488 and opened in New York at the session low of 1.1430. German GDP rose 1.5% in 2018 which was “as expected.”
OIL
Oil prices rallied following the China stimulus news and supported by Saudi Arabia’s earlier comments that demand will increase in 2019. Oil price gains and China stimulus boosted Asia equity indices. European bourses are slightly positive as are US equity futures.
CAD
USDCAD continues to consolidate Friday’s losses, trapped in a 1.3240-1.3300 range. Prices are supported by last week’s dovish policy shift by the Bank of Canada, weaker than expected economic data including Trade, Housing Starts and Conference Board Consumer Confidence.
