UK Prime Minister Theresa May’s stiff upper lip began to quiver last night after her Brexit plan was crushingly defeated in a Parliamentary vote, 432 to 202. Adding insult to injury, she faces a no-confidence vote today. She is expected to win that vote. GBPUSD dipped, and rallied overnight but opened in New York this morning unchanged at 1.2860. One school of thought suggests that the lack of GBPUSD selling is because the markets have downgraded the odds of a “no-deal” Brexit. They now expect a new referendum or a softer version of May’s plan.
The US dollar opened with small gains across the board. The UK Brexit vote supported the greenback a tad as did yesterday’s dovish remarks from European Central Bank (ECB) President Mario Draghi. Mr Draghi warned the Eurozone economy was weaker than expected because of external influences including Brexit, and trade war. He said: “A significant amount of monetary-policy stimulus is still needed to support the further buildup of domestic price pressures and headline inflation.” EURUSD peaked at 1.1424 just before New York opened and dropped to 1.1379 in early New York trading.
The Fed’s Beige Book is the major US data due today.
USDJPY climbed rallied from 108.38 to 108.87 in New York supported by a 1.17% jump in 10-year US Treasury yields. AUDUSD and NZDUSD rallied in Asia supported by news the PBoC added a record $83 billion of liquidity into the market. The rally was reversed in Europe on the back of the stronger US dollar.
Oil prices have retreated from their overnight peak of $52.49/barrel and are trading in New York at $51.74/b. The API weekly crude stocks report showed a small decline in US inventories. Traders are hoping that a successful US/China trade deal will bolster demand.
USDCAD is trading sideways. Prices are supported by the belief the Bank of Canada has shifted to a dovish monetary policy stance, but rising oil prices cap gains. There isn’t any notable Canadian data due until Friday when the inflation report is released.
The intraday USDCAD technicals are mildly bullish while trading above 1.3240 inside a 1.3180-1.3370 trading band. A break above 1.3295-1.3300 will target 1.3320 and then 1.3370. A break below 1.3240 will lead to a test of 1.3180.
Today’s Range 1.3240-1.3310