Daily Brexit update Coveney comfort for sterling and May

Article By: ,  Financial Analyst

 

Daily Brexit update: Coveney comfort for sterling (and May)

Irish politicians have a knack of turning up to support Prime Minister Theresa May just when she needs it. Not just the tense deal with Northern Ireland’s DUP, which props up the UK government. That’s in a class of its own.  But it was May’s Irish counterpart Leo Varadkar who tacitly led an outbreak of more conciliatory language earlier this month, after the President of the European Council, Donald Tusk, infamously told Brexiters to go to hell (essentially). And after another bruising week, Ireland’s foreign minister, Simon Coveney, did the oil pouring. “The EU is serious about trying to help”, he said. Coveney stressed that “scepticism” had increased after May’s latest lost vote showed the gap between her and Parliament is as yawning as ever. Nonetheless, “the Irish government wants to see a package that will help her get a deal”, so long as it doesn’t compromise “…the fragile balance that was put together in finalising the withdrawal agreement." As greenlights go, that’s possibly as good an assurance of continuing EU receptivity as May will get. She now has eleven days to get undertakings from Brussels about the backstop, chiefly its impermanence. If none emerge by 26th February, the PM will face another session in Parliament with higher stakes a day later, in which votes actually matter, and when supporters and non-supporters alike have signalled their patience could be at an end. At that point, it will take more than a nod from Ireland to keep No. 10’s Brexit on track.

How this affects our Brexit Top 10 markets:

GBP/USD: Although set for its third straight weekly drop, Coveney’s comments and a surprisingly robust retail sales print—albeit helped by winter sales—triggered a solid session. Yet there’s little sign that sterling’s plain-sailing days of the second half of January are set for a comeback. With hedgers and speculators edging back into weekly, monthly and three-month options trades it is clear markets see the real crunch points ahead. It’s worth watching options covering 13th March, the date mentioned in an amendment tabled by Labour’s Yvette Cooper which is expected to return if voting goes ahead on the 27th. The amendment calls for an extension of the Article 50 deadline, 29th March, if a deal hasn’t been approved by 13th. Meanwhile, cable’s 120-pip bounce from Thursday’s sharp sell-off jutted the rate above its closest resistance of $1.2865, offering a chance of continuing momentum.  GBP/USD remains below short-term averages though, including the 21-day exponential and far away from a declining 200-day too. Latterly at $1.2891, Thursday’s $1.2957 failure high is a condition for an extensive up move.

GBP/JPY: Against the yen, implacable resistance of 142.75 serves as the chief barrier, though the pound saw its most solid rally of February so far on Friday, rising 91 sen to 142.34.

EUR/USD: Euro pairs saw fresh pressure as the ECB signalled plans to rekindle the central bank’s LTRO scheme of cheap loans to banks are increasingly live. EUR/USD slid to $1.1231, its lowest since mid-November before offers emerged. It then arced up to persistent $1.1313 resistance, where offers are emerging again.

EUR/GBP: The pound’s win vs. euro was also it biggest this month at 50-odd pence. The pair is toughening again on mid-to-low 87s as it has tended to throughout February.

UK 100: Smoke signals on trade talks continue to be promising, even if largely inscrutable, so all major stock indices, including the FTSE are closing the week firm.

Germany 30: The DAX outperformed with a rise of almost 2% as most heavyweights were solidly green on hope of continuing ECB stimulus for banks that could trickle down into the economy too.

Lloyds: A solid RBS quarter buttressed FTSE 100 lenders ahead of more of their earnings reports next week. RBS’s chief rival, with even more exposure to the UK (and Brexit) Lloyds, rose 1.8%.

Barclays: Its 1.6% rise had an eye to both Barclays considerable UK deposit base and its major investment bank operations in the U.S.

Barrett Developments: The builder’s 0.1% downtick capped a week of profit taking following a one-year high on Monday.

Tesco: The chief retailer made the FTSE’s top 10 with a 2.9% advance. The adoption of a new reporting standard, called IFRS 16, will increase reported operating profit whilst reducing pre-tax profit.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

© City Index 2024