GBP/USD was the biggest mover in the early Asia session jitters yesterday, falling below 1.2462 to a low of 1.2376 ahead the UK delivering signed Article 50 letter to the EU. Still, the currency is only 50 pips down from Monday’s open of 1.2489, and is currently trading around the middle of its 6-month range. Negotiations are expected to have a far greater impact on market moves in contrast with the unsurprising triggering of Brexit through Article 50.
Prime Minister May stated “there can be no turning back” in her address. In a brief statement EU Council President Donald Tusk described the process that was about to unfold as “damage control” from the consequences of Brexit. Tusk is expected to deliver negotiation guidelines within 24 hours.
Article 50 undoubtedly shifted focus towards Europe and away from the typical US/Trump show – particularly as there appears to be a lack of progress in the Trump administration. After a strong performance on Tuesday/Wednesday, US equities were mixed as the Dow (-0.20%) and S&P500 (+0.11%) took a breather.
In Europe, the DAX (+0.44%) hit 2 year highs of 12,326 and the FTSE and CAC also strengthened over 0.41% each. The market has rallied on Eurozone growth and a signalling of stimulus withdrawal and potential rate cycle shift. However, per a Reuters report, the market has overreacted to recent ECB statements, which put pressure on the EUR/USD overnight trading as low as 1.0739.
The ASX200 was also dragged higher during the US session and is currently trading almost 2 year highs of 5,867 on the futures, as month end flows have an effect.
A supply disruption in Libya plus an Iranian oil minister suggesting output cuts are likely to be extended, saw oil prices rise around 2% overnight. Brent Crude currently trading $52.49 a barrel having reached a 2-week high of $52.60 earlier this morning.
The US Dollar Index approached the 100-level supported by comments from Fed members’ Williams, Rosengren and Evans, each saying that four rate hikes this year a possibility. Evens suggesting better fundamentals would be required.
Today’s calendar (AEST)
11:00am Australia: New Home Sales
5:00pm German Import Prices m/m
In the US Session
11:30pm US Final GDP q/q
11:30pm US Unemployment claims
