· Sterling neared its weakest against the U.S. dollar in more than two years on Tuesday amid mounting uncertainty as British lawmakers prepared to vote on the first stage of a plan to block Prime Minister Boris Johnson from pursuing a no-deal Brexit.
Sterling fell 0.23% to $1.2035 GBP=D4 in Asian trading on Tuesday, having tumbled 0.8% on Monday, its biggest decline in more than three weeks.
· U.S. financial markets were closed on Monday for a public holiday, but weakness in other major currencies and a slight rise in U.S. Treasury yields in Asia helped the dollar index =USD rise 0.22% on Tuesday to 99.284.
· The euro EUR= fell to $1.0954 in Asia on Tuesday, its weakest since May 2017, with sentiment damaged by the break below the key $1.1000 level last week.
· The Reserve Bank of Australia's decision to leave interest rates unchanged at a record low of 1% saw the Australian dollar AUD=D3 ease 0.11% to $0.67111. Economists expect the RBA to cut two more times to boost inflation and support a stuttering economy, a Reuters poll showed.
· EUR/USD technical analysis: Sellers aim for 2-month old support-line during further declines
EUR/USD extends its downpour as its trades close to the lowest since May 2017 while flashing 1.0965 during Tuesday’s Asian session.
12-bar moving average convergence and divergence (MACD) keeps signaling pair’s further south-run. Though, a two-month-old falling trend-line, at 1.0932, could trigger the pullback, if not then 1.0900 can offer an intermediate halt before the quote plunges to fill the gap of April 2017, around 1.0780.
Alternatively, the support-turned-resistance line stretched since late-May 2019, at 1.0988, becomes an immediate upside barrier to watch ahead of August 01 low of 1.1027 and 10-day simple moving average (DMA) level of 1.1056.
During the pair’s run-up beyond 1.1056, a downward sloping trend-line since late-June, around 1.1150, will be the key to follow.
· USD/JPY: Bulls in control amid firmer USD, Treasury yields,
Having surpassed the key barrier at 106.30, USD/JPY now has its sight on 106.50, tracking the rally in the safe-haven US dollar and Treasury yields. The spot ignores Hong Kong, trade and Brexit risks.
Valeria Bednarik, the Chief Analyst at FXStreet explained that the USD/JPYpair has been see-sawing around the 38.2% retracement of its August decline at 106.30, currently trading a handful of pips below the level:
"The pair is technically neutral-to-bearish, according to the 4 hours chart, as indicators head nowhere just below their midlines. Also, the price is hovering around the 20 and 100 SMA, both confined to a tight 10 pips’ range. The pair would resume its decline on a break below 106.00, but it will be below the 105.60 support where bears would take over the pair."
· Sterling fell below $1.20 on Tuesday morning, reaching levels not seen since January 2017 as Britain’s constitutional crisis over Brexit threatens to come to a head.
At around 7:30 a.m. London time, sterling was trading down at around $1.1997.
U.K. lawmakers return from summer recess on Tuesday afternoon, with a cross-party group of lawmakers expected to apply for an emergency debate and seize control of the agenda of the House of Commons, in a first effort to stop a no-deal Brexit.
This would be subject to a vote, which if passed, would tie Prime Minister Boris Johnson’s hands ahead of the suspension of parliament from September 9 until October 14.
· An alliance of opposition parties and rebel Conservative lawmakers should have the numbers to defeat Prime Minister Boris Johnson’s government on Brexit on Tuesday, former British finance minister Philip Hammond said.
· Goldman Sachs has raised its estimate for the likelihood Britain will crash out of the European Union without a deal to 25% from 20% citing the prolonged suspension of Parliament, as lawmakers decide the fate of the government’s Brexit plans.
· It’s up to U.S. President Donald Trump to end the stalemate in the trade war and reach a deal with China, said Wang Huiyao, an advisor to the Beijing government.
China has already taken “all efforts” — including passing a new foreign investment law in March — to address some concerns that the foreign business community complained about, said Wang, the founder and president of Beijing-based think tank, Center for China and Globalization.
· U.S. President Donald Trump “doesn’t necessarily need a deal” with Beijing in order to be reelected in the 2020 presidential race, says a senior director at the U.S.-China Business Council.
“As long as the trade war that we’re in right now isn’t having an impact on the United States’ economy that is demonstrably bad for regular Americans ... being tough on China, looking tough, is probably enough,” Anna Ashton, senior director of government affairs at the U.S.-China Business Council, told CNBC’s “Street Signs” on Monday.
Still, she added, the new tariffs that went into effect over the weekend — along with those that will take place in December — will “hit every consumer product that Americans buy.”
· U.S. President Donald Trump may have the power to order American companies in China to leave the world’s second largest economy, but it would cost him politically, said a business leader on Tuesday.
“The President could issue orders that would make it very difficult for American companies to continue to do business in China, but I think it’s not a legal question of whether he’s going to do that — it’s a political and economic question,” said Timothy Stratford, chairman of the American Chamber of Commerce in China.
However, Stratford said it would be an “extreme step” for the president to exercise that right.
“I think that it would be a very radical step for him to take. I think there would be huge pushback across the board in the United States including from leaders of his own political party, and therefore it seems unlikely that he would go that far,” he said.
· Embattled Hong Kong leader Carrie Lam said she has caused “unforgivable havoc” by igniting the political crisis engulfing the city and would quit if she had a choice, according to an audio recording of remarks she made last week to a group of businesspeople.
At the closed-door meeting, Lam told the group that she now has “very limited” room to resolve the crisis because the unrest has become a national security and sovereignty issue for China amid rising tensions with the United States.
Hong Kong leader Carrie Lam said on Tuesday she has never asked the Chinese government to let her resign to end the city’s political crisis, responding to a Reuters report about a voice recording of her saying she would step down if she could.
· Italy’s anti-establishment 5-Star Movement and center-left Democratic Party (PD) unveiled a shared policy program on Tuesday to serve as the basis of a new coalition government, putting a more expansionary 2020 budget at the top of their agenda.
The policy platform stressed, however, that the 2020 budget would be crafted without endangering public finances. Italy has the second-largest debt burden in the European Union as a proportion of economic output.
· Oil prices fell on Tuesday as the ongoing U.S.-China trade war cast a pall over markets, with soft South Korean data adding to concerns over emerging markets and a rise in OPEC output.
U.S. crude CLc1 was down 26 cents, or 0.5%, at $54.84 a barrel by 0644 GMT, while Brent LCOc1 was down 6 cents at $58.60 a barrel.
Reference: Reuters, CNBC, FX Street
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