· The British pound bounced on Wednesday in the wake of a parliamentary vote opening the door for another Brexit delay, while the dollar drifted lower after weak manufacturing data stoked wagers on aggressive U.S. policy easing.
Sterling, pushed to a near three-year low on Wednesday, climbed almost 0.2% against the dollar to $1.2100 and firmed 0.1% against the euro.
· “I think there’s a real opportunity for the pound,” said Nick Twidale, director at Sydney FX brokerage Xchainge.
He said the rise was driven by British lawmakers voting to defy Prime Minister Boris Johnson to put a proposal delaying Britain’s exit from the European Union beyond October on parliament’s agenda on Wednesday.
“It now opens up the possibility again of, I suppose the extreme would be a no-Brexit, but a softer Brexit,” Twidale said. “We’d priced in so much of a hard Brexit with Boris Johnson coming in, that I think there’s real opportunity for some sterling appreciation.”
· The dollar gave up a two-year high touched on Wednesday against a basket of currencies to trade at 98.915, giving ground to the yuan and steadying against the euro, with one euro buying $1.0975.
· The yen weakened slightly to 106.11 per dollar after a Bank of Japan board member said the central bank must pre-emptively ease monetary policy to fend off risks to the economy.
· EUR/USD snaps longest losing streak in five months, focus on Lagarde's speech
EUR/USD eked out marginal gains on Tuesday, snapping the six-day losing streak, which was the longest in five months and could rise above 1.10 in the European session today.
The pair created a Dragonfly Doji candle on Tuesday, which is widely considered an indication of indecision and potential trend reversal. When the candle forms at the bottom of a downtrend, as is the case with EUR/USD, it is considered a sign of bullish reversal.
So, the probability of the pair revisiting the former support-turned-resistance of 1.10 is high.
The European Central Bank's nominated President Lagarde is scheduled to speak at 07:00 GMT. The incoming European Central Bank (ECB) President Christine Lagarde will be grilled by European Parliament lawmakers on how she intends to run the monetary policy.
A break above 1.10, as suggested by Tuesday's candlestick pattern, will likely remain elusive if Lagarde reiterates that the monetary policy needs to remain highly accommodative and expresses willingness to use all the tools at the disposal to counter the economic slowdown and weaker inflation.
· President Donald Trump sought to prod China into doing a trade deal before the U.S. presidential election in November 2020, or face even more difficult negotiations during his potential second term.
“Think what happens to China when I win,” Trump said in a tweet on Tuesday. “Deal would get MUCH TOUGHER!”
The tweet comes as Chinese and U.S. officials are struggling to agree on the schedule for a planned meeting this month after Washington rejected Beijing’s request to delay tariffs that took effect over the weekend, according to people familiar with the discussions.
· Australia’s much-vaunted economy grew at its slowest pace in a decade last quarter as cash-strapped consumers went on strike, an urgent argument for more monetary and fiscal stimulus as headwinds mount globally.
Gross domestic product (GDP) rose just 1.4% in the June quarter from a year earlier, data showed on Wednesday, matching the worst of the global financial crisis and well short of the 2.75% considered “trend”.
· Hong Kong leader Carrie Lam will announce on Wednesday the formal withdrawal of an extradition bill that triggered months of unrest and has thrown the Chinese-controlled city into its worst crisis in decades, Cable TV and other media said.
It was not immediately clear if the announcement, due later on Wednesday, would help end the unrest.
· Market focus is firmly on U.K. Prime Minister Boris Johnson’s next move after a majority of U.K. lawmakers voted Tuesday to take control of parliamentary business.
Market focus is firmly on U.K. Prime Minister Boris Johnson’s next move after a majority of U.K. lawmakers voted Tuesday to take control of parliamentary business.
What happens next is uncertain, with various potential scenarios including a possible snap election – the timing of which could largely determine the direction Brexit takes given the default position is that the U.K. leaves the EU on October 31 — if the government does not request a further delay — with or without a deal.
Johnson said Tuesday that he would put forward a motion to hold a snap election, although he needs two-thirds of parliament to approve a vote. A vote of no confidence in the government could also be tabled by the opposition.
· Oil prices recovered some ground on Wednesday, boosted by a wider market pickup on positive news from China’s services sector, having touched their lowest in close to a month during the previous session on fears over the weakening global economy.
Brent crude LCOc1 was up 31 cents, or 0.53%, at $58.57 a barrel by 0619 GMT, while U.S. West Texas Intermediate futures CLc1 gained 34 cents, or 0.63%, at $54.28 at barrel.
Oil prices sank to a nearly one-month low on Tuesday following data that showed U.S. manufacturing activity in August contracted for the first time in three years and euro zone manufacturing activity contracted for a seventh month in August.
But global markets bounced on Wednesday after a private survey showed that activity in China’s services sector expanded at the fastest pace in three months in August as new orders rose, prompting the biggest increase in hiring in over a year.
Reference: Reuters, CNBC, FX Street
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