Morning Call: It's 'May Day' for the UK
Today's Brexit vote is the crucial risk event for markets as Prime Minister May faces a near-certain defeat of her proposed deal.
Summary: The data are in, the Fed remains committed to policy normalisation, and both the USD and US equities are tilting higher.
The greenback is grinding out gains across the G-10 currency spectrum, bolstered by yesterday’s Federal Open Market Committee meeting results, rising stock market prices, and a round of robust economic reports.
Today's data reinforces the FOMC’s view that, according to the statement, sees economic activity rising at a strong rate with expectations for sustained economic expansion.
US Durable Goods easily beat forecasts and rose 4.2% in August. Q2 GDP was as expected at 4.2%. That news gave an added boost to the US dollar. EURUSD added to its European losses. Traders are eyeing the Italian budget negotiations with trepidation while the different interest rate policies between the European Central Bank and the Fed weigh on the currency pair. EURUSD technicals are negative after moving below support at 1.1720 and breaking the four-hour uptrend line from the middle of August when prices moved below 1.1702, putting 1.1630 in play.
GBPUSD is trading modestly softer after a somewhat choppy ride from the New York open of 1.3131. Prices climbed to 1.3162 during Bank of England chief economist Andy Haldane’s speech. He predicted that if there was a disorderly, no-deal Brexit, the BoE could hike or cut rates.
USDJPY was in demand from the open, rising from 112.79 to 113.10 where it is trading as of 14:00 GMT. Traders are focused on the prospect of rising US interest rates and a gain in US Treasury yields today.
USDCAD is consolidating gains from yesterday and in European trading following President Trump’s harsh assessment of Canada’s Prime Minister, its chief trade negotiator, and its negotiating tactics. Hopes for a September 30 trade deal disappeared faster than a cold beer on a hot day.
Wall Street traders are not bothered by yesterday’s rate hike or expectations for a December move or even trade wars. The three major indices are well into the green, led by a 0.78% rise in the Nasdaq.