Forex news from the European morning session - 28 August 2019
Headlines:
- US MBA mortgage applications w.e. 23 August -6.2%% vs -0.9% prior
- Boris Johnson sends out letter to MPs
- UK PM Johnson confirms that Queen's speech to be held on 14 October
- Italy: PD chief Zingaretti says he has accepted Conte to be prime minister in talks
- Brexit: UK government looking to extend recess period to 14 October
- RBA expected to keep cash rate steady next week - poll
- PBOC reportedly to issue its own cryptocurrency as early as November
Markets:
- CHF leads, GBP lags on the day
- European equities softer; E-minis flat
- US 10-year yields down 1.4 bps to 1.457%
- Gold up 0.1% to $1,544.70
- WTI up 1.2% to $55.62
- Bitcoin flat at $10,136
It's all about the pound as Brexit focus returns with Boris Johnson submitting a royal request to prorogue parliament up until 14 October, reigniting fears of a no-deal Brexit.
The Queen is surely not going to turn that request down and it is potentially going to trigger a constitutional crisis with parliament returning from the summer recess next week.
The pound took a hit initially on the rumours before sinking further as chatter built up before Johnson confirmed the move on Sky News. Cable fell from 1.2270 to a low of 1.2157 (more than 1%) before rebounding slightly to hold above 1.2200 currently.
There is still notable support for cable around the 200-hour moving average and that seems to be the area where buyers are still clinging on to for the time being.
It is utter chaos in the UK political sphere as parliament members from opposition parties are getting more desperate to stop Johnson now. There's talk of bringing things to a court session in Scotland since the English courts are never going to rule against royalty but a lot of this is very much hocus-pocus in my view.
The fact now is that legislative efforts would see no avail and I doubt that there is any legally binding measures that can be tabled to stop Johnson from pursuing a no-deal if he wishes to at this point. A no-confidence motion seems most likely but we'll see how things develop when parliament reconvenes on Tuesday next week.
In other markets, gold maintained a firm front as the dollar held steady for the most part. Equities and bond yields continued to display more cautious tones as markets are navigating through the week with trepidation.
The aussie and kiwi are slightly weaker but nothing too overwhelming as the latter recovered from near four-year lows against the dollar earlier on today.
Looking ahead, the risk mood is expected to continue to play a key role in driving trading sentiment but also pay attention to the pound and Brexit focus returns with a bang.
