MPs vote to delay Brexit

Okay, very good morning everyone. I'm back on the hot seat. It is the 15th of March and I hope everyone's keeping well and recovering nicely from your whiplash if you've been trading the pound most recently. It has been one hell of a journey and that journey is only going to get harder, more whipsawry, and more difficult as we move forward. Um, okay, you can hear that background. Um, as we go forward, um, because the Brexit date is now fast approaching, and as you can see, we have had some developments overnight. So last night we have seen Parliament backing the government's proposal to delay Brexit, and this was with a vote split of 413 to 202. So majority very much looking to delay the leave date by the 29th of March. However, there were other developments as well. We had a number of amendments. Now, keeping track of these is becoming quite difficult here. So we got E, which was rejected, and this was basically saying the House of Commons will not have a majority, will not have the ability to find a majority for a different approach to Brexit. Also, Amendment I was rejected, which is the indicative votes. So this is MPs having indicative votes to see, you know, how would let's say, a second referendum or further delay be seen by MPs. So basically taking away a lot of the optionality, I'd say, on that front. And there was also voting down of a second referendum, which was Amendment H. So I guess there has been some degree of stability on this front, with a lot of these— a lot of the factors which could overcomplicate matters now being sort of ruled out at least for now. So if we turn to this Bloomberg article, I think this sums it up quite nicely. So, vote on the extension. So, if the vote on the extension was rejected, as an example, this is from the EU, then we fall out on the 29th of March with a no-deal scenario. That would obviously be the worst-case scenario. Now, the probability of that has gone down following the vote that we saw on Wednesday. However, hasn't gone away altogether, however, because for us to get an extension, uh, we also need the EU. It's all fine for us to want one, um, but we need the EU to agree with us. And for the EU to agree with us, they want a limited one, and they want to know why we're getting an extension. I think this is what Anthony has been covering quite a lot. Um, you know, in the grand scheme of things, I don't think this is still a possibility. I don't think it's in EU's benefit or the UK's benefit to tumble out with no deal. So let's still rule this out. Definitely not going to be your base case. So extension accepted. Now this is where we have MV3, so Meaningful Vote 3, which is going to be largely the definitive one. So either MPs accept it on the third attempt, in which case Brexit happens, probably with a short delay. So that'll be looking around the 30th of June. You have the— yeah, so 30th of June would be when that would go about. If it gets rejected, however, then Parliament would move to seek a new consensus which will then lead to sort of 3 things: there's soft Brexit with a delay, Tory hardliners provoke general election, and second referendum delays. So, you know, on the balance, I think, you know, we've got to this phase here. I do believe that we are gonna have MV3 voted through and Theresa May's deal is gonna get pushed through parliament, because now sort of the options which are left are becoming unfavorable for the people who have been providing the most resistance, and that's your hard Brexiters. You know, no deal is now really off the table, which again, people who are highly Eurosceptics would not have wanted that to happen. So we have now a delay to Brexit, which again they don't want, or really a no Brexit scenario growing. So what they want is sort of diminishing while the risks that, or the eventualities which they don't do not want are sort of growing. So I think on this balance, they should fall in line and we will see, um, them push through this deal. Now let's have a look at the charts. Just getting used to the system. Okay, and transition that across. So having a look at BP6 here, and very muted reaction in pound overall. But yeah, we've been following the pound now for a week and quite choppy and volatile, um, for sure. Let's just like some size of these. Now this is definitely something for the Stage 2 guys. It's a quick shout out to you guys. Um, there is no point trading pound unless you are sitting there behind your desk. You know, don't be complacent and sort of put orders in, in the market and then walk away from your screens because we are seeing swings of— here you can see 2.5%, 2.

1% from Wirecard.

They states they reject. Um, okay, and then the next day we had an intraday swing of 2.49. So these were the votes on Wednesday. This is, uh, again quite a big move. Now things have settled down quite recently because, um, we've sort of priced in a lot of what we were expecting at the moment. So there's no deal probability sort of diminishing and a bit more stability coming in. However, it takes one tweet, one headline for you to get whipped out. So, you know, very, very difficult market to be trading. I would be very cautious approaching this. It's already got quite a notorious nature anyway. Um, however, look, so for the past couple of days we have sort of been seeing a move lower, and I will leave more of the technicals to Sam here. But, you know, definite positivity in sterling at the moment if you look on sort of a longer time frame. Has sort of been trending higher as no-deal risk starts to unwind. Okay, so that's me and my pound chart done. Other things I want to look at are— let's look at the BOJ. So if I transition across— new OBS, sorry about that, guys, just getting used to. Um, so last night what we saw was, um, Bank of Japan downgrade their overall assessment on exports, factory outputs, and overseas economies. Um, so we did see the yen weaken just a little bit, but I think this builds to a larger picture which I want to discuss. So the Bank of Japan again has had to be quite dovish, downgrading the economic outlooks, but this is Japan's interest rates at the moment. So already highly negative. And, you know, if we start to see further economic contraction or slowing in economies all over the world, Japan is most definitely going to suffer. And being up there with one of the largest economies in the world and the debt-to-GDP issues as well, I think this is quite a fragile situation. We've also had the likes of the ECB come out more more recently and turned to basically say that governments must step in to nurture the economy. They will do whatever it takes. I think this is building towards almost desperation from the ECB here. Similar to Japan, they already have ultra-loose monetary policy. You know, after €2.6 trillion worth of quantitative easing, we're still seeing lackluster inflation and growth. And this is coming to the point where the ECB is having to ask governments to step up their involvement in nurturing the underlying economy. So the recommendations they have made have largely been ignored by most countries. So, um, you get the charts back up here. So, you know, we are seeing a bit of risk here where we are seeing economies start to slow down across the globe. So I wanted to talk about euro here in particular, because I do believe that we do have bouts of dollar strength still to be coming into this market. Because if you look at where we are seeing performance, we are seeing performance in the United States of America while we are seeing sort of downgrades to economic growth in the likes of euro area and Japan, etc. So if people are going to be buying a currency, you're going to see that relative valuation coming into the dollar. Yes, we have sort of seen a bounce in the dollar index somewhat since the beginning of March, but we still are right down here at the bottom of this move, and I expect this move really to continue. As you can have a look quickly— sorry, clear this line here. So even though we are seeing the small move lower, and I know this has been catching some of the newer guys out, why are we seeing this dollar weakness? When I thought the trend for the dollar was very much higher. And I think this is where we need to be more aware of what's happening on longer timeframes. So the dollar has been strengthening now for— since really the beginning of 2018. So it's been over a year and the dollar has really gone one way against the euro as we've started to see euro economic weakness relative to, let's say, the United States of America. So I'd be expecting a continuation of this dollar strength in the forthcoming weeks. However, we may have a little bit more room to the upside before we start to see that, um, materialize. Now, why are we seeing the dollar strength in terms of charts? Well, yes, this is, this is really the story here because we are seeing growth of around 2.6%. So of course we have the 4.2% growth rate in the US, which has now started to come down somewhat, now around 2.6%, which is a slap bang and sort of on the higher end of the average for the past 12 months. So yes, we could look at this as we've fallen 4.2%, but this was Trump's steroid injections into the market. Um, we're sort of returning back to normality and at about 12-month average if we look at sort of your longer 10-year, you know, growth rates are still where they were, you know, stably actually for the past 10 years. So US still looking to continue to grow. Let's put this relative to the euro area. Euro area, after seeing somewhat stellar growth in 2017, 2017, coming into 2018 has been negative, and this is set to continue. So I'm definitely looking for on my medium term, continue to see the dollar appreciate against the, uh, euro. Um, with that being said, there is a story which is bubbling away in the United States of America and all over the world actually, is this lower inflation rate. Now the reason I talk about this is we're just mentioning relatively strong U.S. growth, however inflation is low, and that drops us quite nicely into something called the Goldilocks scenario where we're seeing strong growth and 2.5%. Yes, the trend may be lower, but it's still on the 12-month average and where it's been for the past, um, 10 years. But still, 2.5% is good growth with inflation which is decreasing and set to continue to decrease. Well, that puts us in the Goldilocks scenario, and equity markets are very much on the front foot following this. So after sort of sell-off we saw in Q3. We are now up 22% and quite a key area coming into play, and we've been discussing this now for weeks. And I'll leave Sam for more of the intraday technical stuff. However, you can see we're coming in now for the first, second, third, coming in for the fourth test here on the S&P 500. Trade talks with China seem to be settling somewhat. And frankly speaking, I mean, I really don't think there is much risk in the market. I know we have Brexit, we have Trump, and we have all these other factors, but are we really saying that trade wars aren't gonna be ironed out? Of course they are. We're not gonna have a no-deal Brexit. It very much looks like we have soft deal. And yeah, we had periods of fear, but this is a again, human emotion driving as opposed to the rational person. It's just Sam who was calling an equity rally from right down here. But yeah, you know, he was right. Brexit's going to go through. Trade wars are going to settle. This is— when you get that fear over and done with and a bit more of a rational mind comes to think about it, that's net positive for equities, plus a dovish Fed given the fact that inflation has been tracking lower. And strong US equity— US economic growth. So still very much a bullish call here for equities. And if this level does break, then I really don't see any reason for this market not to go and run back up to the all-time highs. It's only 4% away, to be fair. We've covered more than 4%. I think this is on the 3rd of January. We've covered that distance. Yeah. 7%. I don't think we're gonna see like massive sharp rally, but this last zone of defense is coming into play, um, at the moment. We've also seen Dow Jones somewhat take a hit, and this sort of follows on from the Boeing stories, the 737 MAX, um, crashing and killing a number of its passengers. Now we're being seeing a grounding in various countries weighing on Boeing stocks and maybe initiating a bit of a risk-off move. Now again, with Boeing stocks down 10, 12, 13, 14%, however much they're trading down at the current moment, truth of the matter is Boeing is going to get over this. People are going to get over this. And it's quite— it's a bit of an oversimplification, but, you know, air travel is still the safest way to travel, and there's just been a moment of panic. And Boeing will be fine. And once that happens, you're going to see Boeing start to outperform perform, and this laggard in the Dow Jones will sort of cease to exist, and that will then hopefully support the S&P as well. Looking at the NASDAQ here as well, and NASDAQ has punched out highs for 2000— well, actually been punching for highs for quite a while, 2019. But yeah, technically equity markets looking quite interesting. Let me just have a look at European equity markets. Now, with European equity markets, if we see things go smoothly between China and the United States of America, I also believe that's going to be hugely positive for European equities, including the DAX and Euro Stoxx, which, as you can see, compare this on a relative basis, you know, up 16%. So seeing this positivity because whilst the US has been focusing predominantly on China at the moment with the $350 billion trade imbalance, the next largest economic area would be Europe, in which they have a trade imbalance. So if things go smoothly with China, I think that will stop Donald Trump from ruffling any further feathers. So risk on very much across the board. That's also reflected in WTI, which has been punching somewhat higher. Here we are. So yeah, coming into May, OPEC is gonna— Trump is gonna have to reevaluate some of the waivers that's given to countries buying Iranian oil. Those are looking to now be reduced, and the US is looking to reduce Iranian output— or sorry, Iranian exports down to 1 million barrels per day. So that'd be a significant reduction, which is supporting oil prices, coupled with more— I wouldn't say positive growth outlooks, but OPEC+ also looking to cut their production, or not pandering or bidding for Donald Trump, as was stated earlier. So energy markets on the front foot, so energy stocks also benefiting, supporting particularly the S&P 500, which has relatively high numbers of oil and gas shares in it. Technical level has now been taken out. Really, I don't see any reason— well, there's one thing preventing this market running quite cleanly up to the $60 handle, and that's the $59 mark. Once that gets taken out, technically we've got a clean run to about $60, where is your next natural point of resistance. And even this morning we're seeing some positivity for oil. Market over here. Well, as I said, just ticking down, coming out of the Asian range, breaking out, quick run to the R1 level. So at the moment, you know, it's been a difficult few months for trading. 2019 has been tricky, you know, the grand scheme of things. If you look at stocks, they have gone higher, etc. It's been quite simple, but that was sort of on a backdrop of quite a bit of risk in the market. But it does seem like we're entering a bit more of a favorable period. The real risk coming in the face of Brexit. I mean, for direction, a bit more volatility. I think once Brexit is resolved, I think the next focus is going to be on the euro area, which we're going to definitely see some volatility in European assets. But at the moment, you know, I definitely see the dollar increasing, whether that's on trade war risk, which means we're going to see safe haven flows into the dollar, or just sort of flow in the market. Okay, I'm going to just quickly look at the calendar before I hand you over to Sam. Having a look at today, we have some key data coming out. We have euro area final inflation numbers for, for the month of February. So expectation is 0.3% from previous -1% and 1.5% on the year-on-year numbers, in line with previous 1.1%, 1.5%. So inflation looking to just stabilize here in the euro area. Um, we have New York Fed manufacturing. We'll be on the mic to cover this, uh, obviously as the data comes out, coming in at 12:30 as opposed to 1:30. Um, so expecting a positive reading relative to previously previously 8.8%, currently expecting 10%. Manufacturing output, industrial production numbers coming out. Another key one to keep an eye on actually is going to be this US Michigan sentiment. This number is coming with an expectation of 95.3, that's higher than 93.8. So coming into Q4 2018, we were seeing sentiment data take quite a bit of a hit in the United States of America, but somewhat has bounced now with equity markets going up. So I think being your preliminary numbers for March is going to be quite interesting. Now if we see a good number, we've already seen equities rally quite, quite a lot from their lows, up almost 20%. But I think if we start to see a downtick in sentiment, that may be a bit of a trigger for a risk-off move. And then coming in at 5:30 US time, 9:00, we got the Baker Hughes rig count. I'm going to double-check that. I I was under the impression I'll be at 9:30. Um, all right, finally guys, we have quadruple witching. Um, so we have index futures, index options, stock options, and stock futures expiring today. This generally brings quite a bit of volatility into your FX market and indices, particularly coming in towards sort of your US trading session. Um, is there any particular way to trade this, or is there a strategy in play No, just be careful, expect the unexpected, expect bouts of volatility, don't get sucked in would be my best advice. Cool, thank you very much, guys. I'm going to now hand you over to Sam. Best of luck and bear in mind volatility is going to be here, and if you do see sporadic volatility, don't get sucked in. Quadruple witching has generally been a day where we see newer trainees generally suffer, so be warned would be my advice. Thank you guys, have a good day.

Thank you, Safe. I hope everyone's having a good Friday. Let's have a quick look over how we're trading. I mean, going into Quadruple Witching, and like you said, the volatility can start to pick up. So let's have a quick look over at the S&P. And before we go more into a day, worth having a look just at this, this range again that we're still trying to to, to break out from the, the high going back to, uh, let's get the exact date, October the 17th. We've, we've had a few goes at, uh, really testing it on the daily continuation. Obviously when we drop it down, we're, we're really testing that level. And then you can just see how important really going back to this month, well, the beginning of this month, I think it was right on the 4th, just how important this resistance point is. So that's definitely one to keep an eye on. Uh, if we can close above there, fantastic. And then you might then get the further extended run next week. And that's something that I would really be, be looking at, um, come the close of today, or, you know, Sunday when we, we open the electronic trade again in the evening. To the downside, you know, if you're— if you are looking for these markets to potentially stall a bit, breaks of these trends are worth looking at. But I think you've got to go with the, the overall feel for the market. Last couple of trading sessions where we had the rumor of, of Trump and, uh, or US and China, I should say, delaying, um, meeting till at least April. You can see we came down, but look what happened after that— we went higher. If this market at the moment, sentiment has, uh, has brushed away the, the thoughts of last week to completely reverse, um, that. And we have hit that high, so that is obviously a key resistance point. But for potential trades above the R1 and this trend, uh, to sort of break from those last couple of highs, that would be my favorite, favorite one. But look, if the momentum does come in, another negative headline, sure, a bit of a short. And then you're looking at this other key level, not just because of the highs that we had back on, uh, the 5th, you see marked up here in the 12th, but also the 2800 just below. So some important levels to be aware of, not just in the S&P, but of course the NASDAQ as as well, where we had a new high for the year a couple of days ago, uh, and similar sort of pattern looking at those previous highs to potentially break with a resistance point of the high of the day and the R1 might be something to— worth having a look at. Whereas if you favor the downside, I mean, it's not— well, it's a clean enough trend. You've got your more than 3 tests and that pivot to go. That might be, you know, where you're looking at. Good support levels are lower down, those previous double tops. And, um, here you can see the 12, uh, higher the 12 hasn't really been retested again. So for equities favoring the upside, but technical breaks to the downside, I would say would be short-lived before, uh, the buy the dippers come back in, uh, again. Might as well bring up the pound. It's, it's going to be a, another tricky day, you'd imagine. I mean, if you have a look at yesterday, we just sort of gradually grounded lower We've already had a push. I'm just going to remove this, this trend line here. A push to those lows of yesterday. You can see how it's acted as a good level of support. I mean, from a technical point of view, the pivot has acted as good resistance. A break above that might lead to a bit of an extension, but trade— huh, the feed gone. Let me just— but trade that at, uh, at your peril, I would say, for for the pound. Um, but yeah, pivot going to, to be key there. Having a look over at the euro, slightly potentially easier market to trade, but with Brexit comments, I would still take a little step back and, and avoid it. Uh, the R1 looks interesting enough because you do have a bit of resistance from those higher points from yesterday that I'd bear in mind. But obviously with the data coming out at 10, I'd almost take a back seat on that as well. We, we had a go at sort of breaking out of this trend, and it's now starting to, to look like it might have just found a top yesterday. So in terms of where we close the, the week, I'll be looking at these, these potential sort of highs here, uh, as a key resistance. If we get another test of that, then sure, we can get a further push through. But if that holds, and maybe we will look down to test, uh, yesterday's low, uh, then and we might start to see this market drift lower again. But the ECB move completely erased there. Having a look, uh, at oil, let me just bring that into picture here as well. We have had that further push, and you can just see how, you know, how good it was, the, the long from 58 yesterday. I remember talking on the mic about it, um, how it, you know, could act as a good level of support support. You also had to pivot a bit below if, if people had fancy that. But yeah, what a level it was, pushed higher and now trading almost 59 today. Yes, we're having a bit of a pullback in terms of key levels of support. You can see, well, around sort of 58.66 to, to do it roughly, was the previous high of yesterday. Then we really tried to battle through it into the back end of the session, tested it a couple of times again here now, uh, this morning before for breaking through. However, just worth, you know, having a look at other commodities. Copper, just over the last sort of hour or so, or is, is coming down under a bit of pressure. Let's have a look at silver. I mean, silver and gold actually this morning had pushed on but just finding a bit of resistance. So commodities in general potentially just starting to, to come off their, their higher points. However, 58.66 does look very strong for oil. Any questions, please, as usual, do, do let me know. We'll come on the, the micro throughout the day, and as we go into the, the close of the week, it will be, uh, important, uh, to see where things close, as that can obviously give that indication, uh, for sentiment next week. U.S. equities, I do feel, even with quadruple witching, you know, if we do get a break of those trends from the, the previous highs and break for the S&P above that October level, we're going to get, you know, a decent move into next week, and the, the quest for all-time highs comes a bit closer. I hope you all have a great weekend. Enjoy the Six Nations, the Gold Cup today, the EC— I'm not the ECB— the European draws. Yeah, Piers has decided that he's Welsh for this weekend. For the, the Grand Slam effort. Whether they can do it or not, England will be waiting to see. But I hope you have a great, great weekend, and I'll catch you all in the chat next week.