Sterling traders collectively shrug shoulders at Brexit vote
There always seems to be another twist when it comes to the Brexit process and the latest came last night, when Parliament voted to take control of proceedings on Wednesday and force a series of indicative votes on how to move forward. Clearly Theresa May has suffered a number of setbacks in recent months and this is yet another embarrassing defeat but there’s no guarantee it’s going to dramatically change the process and there is nothing to compel her to act on the result.
From a markets perspective, sterling traders collectively shrugged their shoulders at the result. This isn’t really a game changer at the moment. May doesn’t need to act on anything, there’s nothing to say it will back something that the EU would agree to, we know that Parliament favours a soft Brexit and that it opposes no deal. Perhaps Wednesday will throw up a few surprises but, like many other votes that we’ve seen, it could also easily achieve very little and still leave all options on the table.
Environment looking bullish for gold
Gold has continued to nudge its way higher in recent days but once again it’s paring gains early in the session today. A softer dollar on the back of last week’s very dovish assessment from the Fed is clearly enabling the gains in gold but the greenback has consolidated in recent days and so the yellow metal is struggling to gather any real upward momentum.
Gold Daily Chart
It continues to find resistance around $1,320, a level which if broken could bring $1,340-1,350 into focus. Gold’s appeal as a safe haven that performs well during periods of central bank easing – or in this case, no longer tightening – may also continue to be a supportive factor given recent events. The inversion of the yield curve has clearly spooked investors and if stock markets come under ongoing pressure, gold could see its popularity increase.
Oil prices stall on global growth fears
Oil is trading higher early in the session on Wednesday but once again, what we’re seeing is Brent and WTI paring losses sustained at the back end of last week. The rally – which has been losing momentum for some time – stalled as the Fed lowered its assessment on interest rates and German manufacturing further added to the gloomy outlook for the global economy.
WTI Daily Chart
Naturally, a weaker global economy and heightened risk of recession weighs on demand for oil and prices, further offsetting the benefits of the OPEC+ output cut. The longer the US yield curve remains inverted, the more pessimistic investors may become on the outlook which could continue to drag on risk assets.
For a look at all of today’s economic events, check out our economic calendar.
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