Archie Bunker regularly told Edith to “stifle it.” A rash of geopolitical risks is doing the same for FX trading, at least in overnight markets. UK political theater and US/China trade are vying for the market’s attention. At the moment, the UK is winning.
Prime Minister Theresa May is facing a “no-confidence” vote today. Forty-eight disgruntled MP’s wrote letters to challenge her leadership. The vote is today with the results expected around 4:00 pm EST. May needs a simple majority of 159 votes to retain her job, and many pundits believe that will be today’s result. Yesterday, the news of a potential no-confidence vote drove GBPUSD from 1.2635 to 1.2480 while triggering the vote lifted GBPUSD to 1.2550 in Europe.
Optimism about the ongoing US/China trade talks got another lift yesterday, after reports that China would reduce auto tariffs and increase soybean imports. President Trump offered to intervene in the Huawei CFO’s arrest if it would help to secure a trade deal. The Huawei CFO was granted bail, yesterday. Asia and European stocks rallied on the news.
President Trump threatened to shut down the US government which is more bun than burger. Not all employees are affected, and those that are will not lose any income.
AUD & NZD
FX markets were relatively quiet and rangebound overnight although the US dollar managed to keep most of its recent gains. AUDUSD and NZDUSD inched higher in Asia but retraced the moves in Europe.
USDJPY bounced in a narrow 113.32-50 range. Gains from slightly firmer US Treasury yields were offset but risk aversion concerns from the US/China trade talks and UK politics.
EURUSD is under pressure. The single currency dropped from 1.1395 yesterday to test major support at 1.1305. Prices drifted higher in a 1.1316-37 range overnight. Brexit concerns, and the EU/Italy budget debate are weighing on the currency pair. Some see the French decision to raise minimum wages and abandon a fuel tax as tacitly supporting the Italian budget stance. However, EURUSD could see a bit of a profit-taking rally ahead of Thursday’s ECB meeting.
Oil prices rose following the American Petroleum Institute Weekly Crude stocks report that showed US crude inventories shrank by 10.18 million barrels last week. The shutdown of Libya’s largest oil field added to the gains. WTI oil rose from $51.95/barrel to $52.77/b.
USDCAD was an afterthought in overnight markets. Bullish technicals, broad US dollar strength, the perception that the Bank of Canada flipped to dovish, and concerns about China retaliation over the Huawei CFO arrest are supporting the currency pair.
US inflation data is due this morning. November CPI is forecast at 0.0%, down from 0.3% in October, in part because of low oil prices. There aren’t any Canadian data releases today.
The USDCAD technicals are bullish. The uptrend channel 1.3200-1.3440, from the middle of October is intact and prices are testing the top which keeps the focus on further gains to 1.3550 and perhaps 1.3700. The intraday technicals are bullish above 1.3360, looking for a break above 1.3400 to lead to 1.3440. For today, USDCAD support is at 1.3360, 1.3320 and 1.3290. Resistance is at 1.3390 and 1.3420. Today’s range 1.3360-1.3420