Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Markets Bounce; Pound Nerves Show Ahead Of May’s Showdown

Published 20/06/2018, 07:27
Updated 25/04/2018, 09:10

Markets Bounce As News Wears Thin

US equities tumbled on the open and languished at lower levels across the session, as trade war fears lingered. The Dow dived 300 points in its 6th straight session of losses as the reality of a trade war sunk in. The S&P 500 dropped 0.4% whilst the Nasdaq gave up 0.3%, both recovering from earlier 1% falls. Perhaps the most ironic part of Trump’s trade game is that he could end up doing a great deal of damage to US firms which look towards China for impressive sales.

The markets have been trading on the same piece of general trade war news for a while, as a result selling exhaustion has started to set in. Asian markets are seen moving higher overnight and European bourses are also expected to push northwards on the open, although the gains are making up fraction of what the losses totalled over the previous few sessions. Any fresh news of retaliation could see traders snatch risk back off the table quickly.

Dollar Remains Firm, For Now

The dollar is a standout winner from the escalating trade conflict, benefiting from its safe haven status. However, this flow could be short lived if and when it becomes clear that Trump’s trade war is a direct threat to the stability and economic growth of the US economy.

May’s Crunch Vote in the Commons

Pound traders are preparing themselves for another perilous session as Theresa May is expected to face Conservatives rebels in a showdown in the Commons. The Brexit Bill returns to the lower house with both Tory rebels and Theresa May refusing to back down over giving Parliament more of a say should the UK leave the EU without a deal. It remains unclear whether May can pull this one out the bag and as a result the pound is shifting nervously lower as we head towards the European open.

The 'meaningful vote' amendment is widely considered a back stop to prevent the UK from crashing out of the EU with no deal agreed. Ironically the Bill returns to the Commons to a backdrop of an increasing possibility of no deal being reached, particularly given that progress on Ireland is reportedly as good as non-existent.

Goodbye May, Goodbye the pound?

The big question going into the crunch vote is if May loses will it be the end of her time as PM? Probably not. There would likely be a sterling sell off and fury directed at May for her lack of vision and not bringing her MP’s with her. However, even the most ardent of Brexiters would have problems pushing Brexit legislation through with the minority government.

With 9 months to go to Brexit, it’s too late to switch captain. Therefore, whilst the vote will attract significant attention we don’t see an embarrassing loss as motive to push the pound sub $1.30 – that could come from an excessively dovish BoE on Thursday.

Opening calls

FTSE to open 35 points higher at 7638

DAX to open 38 points higher at 12715

CAC to open 25 points higher at 5415

Original post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.