Sterling bid after Theresa May loses 2nd meaningful Brexit vote yesterday. "No deal" Brexit vote on deck at 3pmET today.
Summary
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USDCAD: Dollar/CAD is trading steady this morning, but still with an offered tone after weak US CPI figures and a last minute bid in oil prices yesterday saw the market slip below chart support in the 1.3370s. Next up are the US PPI figures for February and the US Durable Goods numbers for January. Traders are expecting +0.2% MoM on the former and -0.5% MoM on the latter. April crude oil prices are trading up 1% this morning after last night’s weekly API report showed a surprise draw in crude inventories (-2.58M barrels vs +2.87M expected). Today’s session features the weekly EIA oil inventory report at 10:30amET, where traders are expecting a build of +2.82M barrels. We think USDCAD is at risk of slipping much lower here should the market not be able to recover above the 1.3370s in short order. The next support levels come in at the 1.3330s, then the 1.3290s.
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EURUSD: Euro/dollar is moderately bid this morning, but the market continues to struggle at trend-line resistance at the 1.1300 level. Eurozone Industrial Production for January beat expectations (+1.4% MoM vs +1.0% expected), but traders quickly sold the knee-jerk 10pt pop in prices following the headline. While we think yesterday’s US CPI-driven rally above the 1.1270s now puts the EUR short thesis into question, we think the market needs to do more here to convince the funds to cover. A strong close above the 1.1300 level could be pivotal as it would improve the market’s technical structure. The ECB’s Coeure will be speaking today at 1pmET.
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GBPUSD: Sterling is up almost 100pts this morning from the NY close yesterday, and while one could argue this doesn’t make much sense given another defeat for Theresa May and her Brexit plan in UK Parliament yesterday, this outcome was largely expected by traders. The market was also not able to break intra-day support in the 1.3050s following the news, which we think then forced some shorts to cover. GBPUSD has been drifting higher ever since, despite lots of tough talk out of Brussels today about the ball being in the UK’s court, about the EU being prepared for a “no-deal” outcome, and about the UK having to explain why it would need an Article 50 extension. Headlines have just crossed saying UK Attorney General Cox will not be changing his legal opinion on the EU’s Brexit assurances with regard to the Irish backstop (yesterday’s bearish news). Parliament will now vote at 3pmET today on whether or not the UK should leave the EU without a deal (traders are expecting this motion to be defeated).
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AUDUSD: The Australian dollar is erasing most of yesterday’s gains today after Australia reported a disappointing Westpac Consumer Confidence number for March (-4.8% vs -1.3% expected). Buyers have stepped in at chart support at the 0.7050s however, and seem content to follow EURUSD higher here as NY trade gets underway. Expect the US PPI and Durable Goods figures out shortly to set the broader USD tone for the session. China reports its February Industrial Production figures tonight at 10pmET.
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USDJPY: Dollar/yen continues to hang in there, after traders held the 111.10s and US equity markets shrugged off the weak US CPI report yesterday. The S&Ps are extending gains this morning, which is helping USDJPY push up to yesterday’s highs. We think this optimism could extend further, provided we get decent US Durable Goods data this morning.
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