A day after an open set of votes in Parliament failed to produce a resolution to the Brexit deadlock, markets remain slightly adrift. Although banks and financial firms came under pressure, the FTSE still managed to head higher after a lukewarm opening, while the pound is losing ground against the dollar and the euro.
Late Wednesday MPs voted on eight different Brexit options but rejected each one of them. Nevertheless, two options were less unpopular than others, coming within range of 30 votes between those in favour and those voting against. Those two were keeping Britain in some sort of customs union with the EU and a new national vote on leaving.
The pound climbed within reach of a nine-month high before the votes but then proceeded to slide and is trading down 0.22% this morning. The continued uncertainty on Brexit is making it difficult for sterling to plot a clear course and it keeps bouncing almost as much as the opinions in Parliament. Possibly more worryingly the implied volatility in the sterling market has risen to the highest level since the 2016 Referendum.
China trade progress may slow Wall Street decline
Other European gauges are also making ground this morning despite a slide in Asian markets and a weaker close on Wall Street as both react to signs of weakening in the US and Chinese economies.
The US-China trade talks seem to have made more palpable progress, particularly on the contentious issue of technology transfer and the limitations on US companies operating in China, and the eventual resolution of the dispute will go some way to alleviate the effects of slowing global growth.
US bond yields on an upward trajectory
The Fed’s recent decision to put a brake on the two rate hikes it had initially planned for this year is continuing to create demand for US bonds and suppress yields on government debt. In a move that tends to be a harbinger of recession the yield on 10-Year US Treasuries is now trading below the yield on 3-month debt.
This inversion of the yield curve usually signals the onset of recession within the next one to two years and has not been seen in the market since 2007.
Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient.
Any references to historical price movements or levels is informational based on our analysis and we do not represent or warrant that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, the author does not guarantee its accuracy or completeness, nor does the author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.