27/11/2018 - Markets Wait On Parliament

GBP

The pound rose on Monday after the European Union sealed a Brexit deal but the currency’s gains were curbed by doubts about Prime Minister Theresa May getting the agreement through a divided British parliament.

With European leaders finally endorsing May’s plan for future ties between Britain and the bloc, sterling traders are focused on a parliamentary vote on the deal likely to take place in mid-December.

For now, the odds look stacked against May with criticism of the agreement approved in Brussels on Sunday from all sides, including from the Northern Irish party propping up her minority government.

Recent positioning data suggests hedge funds have started to unwind large short positions on sterling as hopes grow that Britain may manage to negotiate an orderly Brexit.

Net short positions on the pound saw their fourth biggest weekly drop in over a year.

EUR

The euro gained against the dollar on Monday on signs that Italy may cut its budget deficit target to satisfy the European Union, and as a rebound in oil prices helped to improve risk sentiment.

Italy’s governing coalition may reduce next year’s budget deficit target to as low as 2 percent of gross domestic product to avoid disciplinary action from Brussels, two government sources said on Monday.

The euro gained despite data showing that German business morale fell by more than expected in November as the country’s exporters get caught up in a trade dispute between China and the United States.

USD

The dollar held broad gains on Monday as investors sought shelter in the world’s most liquid currency on fears of a slowdown in global economic growth and as U.S.-China trade tensions sapped risk appetite.

Trade tensions between the U.S. and China are also at the forefront with U.S. President Donald Trump and Chinese President Xi Jinping due to meet at a G20 meeting in Buenos Aires on Nov. 30 to discuss contentious trade matters.

The greenback, considered a safe haven currency, advanced as last week’s capitulation in oil prices raised investor concerns that the global economic recovery was losing steam.

Investors are focused this week on a speech on Wednesday by Federal Reserve Chairman Jerome Powell and minutes from the Fed’s Nov. 7-8 meeting on Thursday, for further indications of how many more times the U.S. central bank is likely to hike rates. Slowing global growth has raised expectations the Fed may halt its tightening cycle sooner than previously expected.

Key Announcements

15.00 – USD: CB Consumer Confidence; Forecast at 136.2 against previous of 137.9