May’s deal finds new friends, RBNZ issue warning - Kiwi $ tumbles...
All of a sudden it appears Theresa May’s withdrawal agreement is finding new support from pro-Brexit Tory MPs. Yesterday’s news that Jacob Rees-Mogg would back the deal as well as a positive tone from Boris Johnson has created a new, albeit subdued, buzz around the prospects for a 3rd vote. However, she still faces an uphill battle after the DUP likened her deal to a prison sentence, stating they’d rather see a 1 year delay than vote for her agreement. Brinkmanship on their part?
The pound gyrated yesterday as news crossed the wires both regarding the enhanced support as well as developments for today’s indicative votes in Parliament. For one day it will be in the hands of the Commons to offer guidance on a more acceptable and unified path toward a Brexit solution. Across Tuesday’s trading session, details about the proposed votes flowed thick and fast. Options included: customs union, EFTA, common market 2.0, second referendum and revoking article 50. However, in reality, anything which implies the withdrawal agreement has to be re-opened or re-written would be far-fetched. The day ahead should be an interesting one, and one which produces some volatility across GBP pairs. In respect to the majors, keep an eye on upside resistance levels at $1.34 and €1.18 against the US dollar and euro, respectively.
Yesterday’s policy decision from the Reserve Bank of New Zealand saw the Kiwi dollar kicked down a peg or two. The central bank took the opportunity to address the global slowdown with particular reference to China’s current situation. As a result, the bank have finally shifted from a neutral stance to one where they’ve now confirmed the most likely direction for interest rates would be lower. The Kiwi dollar took a pasting, currently trading 1.6% lower. The market is now pricing a 78% chance of a rate cut at August’s meeting.
Today’s focus will solidly remain around Brexit with indicative voting likely to begin tonight around 7pm. No doubt they’ll be some twists and turns prior to this, however. We’ll also have a plethora of speakers from the European Central Bank including President Draghi himself. Lunchtime will see US trade balance numbers.