Intraday Market Thoughts

Amendments on The Brexit Menu

by Adam Button
Jan 29, 2019 13:01

We move one step closer to the Brexit endgame on Tuesday with votes on two critical amendments (details below). The debates shall progress throughout the day before the votes are due at 19:00 London/GMT. Apple earnings follow two hours later. The US announced charges against Huawei in a further ramp of the trade war. Below is the Premium video for subscribers with regards to GBPUSD, indices, EUR, gold and JPY.

UK MPs will get a say on the direction of Brexit on Tuesday in a pair of critical votes. One vote is the Cooper-Boles amendment, which would block a hard Brexit. As we write this, GBP is being lifted by reports that Labour has expressed its willingness to vote for the amendment. May reportedly told Conservatives on the weekend that she won't allow a hard Brexit but she's hoping to defeat the bill because it would curb her negotiating leverage.

The other vote is the Brady amendment which would replace the Irish border backstop with 'alternative arrangements'. May hopes to take the vote to Brussels to secure something she can pass in a meaningful vote that's now scheduled for February 13. On one hand, passing the Brady Amendment would raise hopes that the Backstop will be amended so that it is more suitable to the Democrat Union Party, which will vote on it. The main challenge here is that this will require Theresa May to go to the EU and negotiate again on the Backstop.  If the Brady amendment does not pass, then we are stuck at the same position where we were before.

With regards to GBPUSD trading, the pair remains above the 200-DMA for the 3rd straight day, formerly a resistance that took 7 months to break.  The base assumption is that there is no breakthrough in the day ahead but such low expectations open the door to a surprise that could lift the pound especially as the risk of a no-deal diminishes and that of delaying Article 50 strengthens.

GBP traders beware this week from other important events such as the revised US Q4 GDP, Federal Reserve decision on Wednesday, US and Canada jobs report on Friday. The resumption of the US-China trade talks on Wednesday will laso be mulled in light of the US criminal charges against Huwawei.

Otherwise, we continue to watch China closely. On Monday, Caterpillar and Nvidia both highlighted slowing growth in China as they cut guidance. The US also announced charges against Huawei and CFO Meng Wanzhou in an escalation that sure to dog relations between the countries while leaving Canada stuck in the middle.


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