Nightmare on Downing Street. UK and EU Agree on Halloween Brexit Extension

The nightmare on Downing Street continues. It is Thursday the 11th of April. As you can see from the headline, Brexit. UK and EU agree delay to 31st of October. Uh, unbelievably— well, is it really unbelievable with Brexit, uh, that they've decided to grant an extension, or at least for now, uh, to the 31st of October, Halloween? Uh, of course, uh, this delay coming late last night will be confirmed as, as late last night into the early hours of the morning, I believe 1 15 UK time, 2:15 local time. Um, if we just have a quick look over the reaction of the market around that time, very limited, very limited. In, in what was expected, the delay was expected. Uh, yesterday we were talking about how there was probably more chance of an interest rate decision change for the ECB than us leaving on the 12th. Obviously tomorrow. So that's, uh, that's been priced in. The, uh, the positive news, I guess, if you want, if there was any spin on it, is that no deal has been pushed further, uh, sorry, pushed further down the line. I believe my, uh, my chart there need changing. So let's have a quick look over the, the chart, sorry, um, of the pound. You can see just where highlighted here around it, it came in and And it was very limited, the reaction. And just the idea, I guess, of no deal being pushed further down the line saw a slight positive, but we're pretty much exactly where we are now— where we were, I should say. So yeah, limited. And as a whole, yesterday, Super Thursday, billed to be this fantastic day, was quite subdued. The ECB were dovish as expected, and the fact that he didn't really say too much in, in the way of, of new dovishness, I would say, is the reason we're back where we are trading. We also had the, the FOMC minutes overnight, which we'll come on to, which was slightly hawkish, but again, we're sort of back to where we were before that in, in many of the dollar pairs. Oil, we had the API obviously Tuesday, DOE confirmed the gasoline, uh, big draw, but we did have a big build. So the initial reaction was peculiar. We did go lower to test the low of the day before pushing higher, and in turn stocks which started the day relatively positive before coming down again around cash open finished higher. And you can see just the importance of this 2900 handle, something we'll talk about again in a moment. We're coming back to Brexit. Unfortunately, you're gonna have to deal with this probably all the way to October. Is Theresa May really gonna get a deal passed through before then? We've already had 2 EU extensions as well. They granted 2 extensions here when they said they wouldn't do it. What's to stop them doing it again? So I think that's why the market is, is quite, quite unmoved for this. If we just go through some of the details, so just to confirm, it isn't that 31st is set in in stone. We have to leave on that day. Anything that's, uh, sort of agreed before then can be done. So it's a flex-tension, the word has been going around. Donald Tusk has sent the message to his British friends, please do not waste this time. So they've, uh, they've given this extension, they want to see results, um, and whether that can, can be done or not, I think, remains to be seen. The course of action will be entirely in the UK's hands. They can still ratify the withdrawal agreement, which of course has not passed through Parliament yet, in which case the extension can be terminated. So Theresa May had to go and give an hour presentation about why she wanted the extension to June 30th, and unbelievably she's been given a longer extension. I mean, that would literally be like going to your professor at university in a group project and be like, look, we've got difficulties coming to the final conclusion. A couple of people in my group I just can't get on with at the moment. We want a longer extension. Is June 30th okay? And then the professor turning around, you know what, have all the way to Halloween. And you can see here, yes, it is very much in the UK's hands, but there's been a couple of comments overnight you know, given the, uh, from the EU side of that, they can give the, uh, the UK time to reconsider, time to think about whether they actually want Brexit again. It— I, I think in, in just having a little read through, um, some of the, the comments on this BBC article and Bloomberg on Financial Times, it was very much a case of it could well have been longer. Uh, Tusk said, uh, how It was obviously a long enough extension, but perhaps not as long as he would have liked. I think Macron was playing hardball, and, and that was his role he perceived. I think he's certainly liking the sound of his own voice at the moment, is Macron. And while he wanted a shorter extension, he got a longer. So is he actually that happy? But it's not as long as maybe the majority of the EU wanted, because that had to be a unanimous decision for this extension. Um, so yeah, it's, it's all a bit up in the air, I guess, of when we're still gonna leave. So when I was coming into work, and I've done this before a couple of times, just writing down on my phone, you know, what's the positive from this, what's the negative. And if we look at the positive, well, yeah, it's the no deal. And but I think that's all priced in for the market now. Just having a look at the pound again on that larger chart, you can see the, uh, the reaction was just so limited. Having a look at the last couple of weeks, well, that low is in play. We're, we're, yes, in a downtrend at the moment, but if you wanted any proof that that's already priced in, you saw that last night in that extension having hardly any real momentum to the upside or to the downside as well. Back to the, the headline. So obviously longer than what May wanted, longer than what Macron wanted, but less than perhaps majority of the, the euro. So they've come to an agreement there, uh, only as long as necessary and no longer than the 31st of October. I think if everyone was to place a bet on the possibility of it going past the 31st of October, there'd be quite a few takers on that. Um, the UK must hold— so this is part of the, the extension agreement— the UK must hold the elections to the European Parliament, and if it fails to do this the UK will leave on the 1st of June. Fine, you know, from the UK's point of view, do that. It will most likely be completely irrelevant anyway, so do it, get on with it. No need to complain or write headlines about it. Let's just move on from that. The European Council reiterates there can be no reopening of the withdrawal agreement negotiations. We're living in a world where when they say one thing, it could well be another, but yes, this is The EU has given Theresa May that deal and she's got to get that through. Whether she can or not will remain to be seen. Whether she'll still be in the job in future again remains to be seen. I know she's threatened or said to Parliament, you know, back my deal and I will resign. It could well be that we get no deal and she's still in the hot seat, if you like, come October when it starts to get a bit more politically heated in the UK around that time as well. So the majority did want a longer extension, but it's a flexible extension. We can leave before— is sort of the summary, uh, of that. Uh, what did May say to reporters? Well, she came out and did a, a quick, uh, statement, 2:45 AM local time. So, you know, fair play to the politicians, they were getting there their money, you know, last night, their overtime. I know that there is a huge frustration from many people that I had to request this extension again. The UK should have left the EU by now, and I sincerely regret the fact that I have not been able to persuade Parliament to approve a deal. I mean, I said this yesterday, it's, you know, it's a decision of a lifetime that is going to affect people for plenty of times. If it takes a bit longer Fine, fine. I know it's gonna be tricky, and to be honest, do I think we'll get somewhere by 31st of October? Probably not, probably not. So we'll be back to more cliff-edge talks soon. Also part of the agreement, in June— I haven't actually found a date— there will be a meeting between the UK and the EU where they just come and talk about any sort of progress that has been made. Nothing sort of set in stone that it does, of course, but just more of a catch-up to see how that's going. So that's one to, to keep an eye out for. You know, there'll be plenty of comments that come through around that time. Um, here is that analysis by Laura Koonsberg just on whether this is good news or positive. And really, the only good news so far is on the idea that the no deal has just been kicked down, uh, the road risk of no deal postponed, as, as Katie Adler says, uh, on that. The next steps going forward, so, uh, while the calendar which will come on to today economically picks up into the afternoon, I think for today Brexit comments might be picking up in the morning but then really, really quietening for the next sort of couple of days. So on Thursday today, the PM will make a statement to House of Commons, and Commons, so that's something to be aware of. Talks between Labour, Corbyn, and May will continue. So again, can we get anywhere from that? Again, up in the air. Also on Thursday, Parliament will break up for its Easter break until 23rd, uh, of April, although further cross-party talks are expected to be held. So of course, in this difficult time, they still got to put a shift in. Um, there's also— and I'll post this in the chat now— you've got the, uh, the statement from the EU just confirming everything there, just that they've detailed a few points going down to number 9, uh, just on the extension and the reasons behind it. So worth a quick look over. Also from yesterday, this is a quick summary. If I just bring in a couple of, uh, headlines that I mentioned— the Fed reaction to the minutes, slightly hawkish. If you just have a look at your, your, uh, charts from 7 PM last night You can see the dollar did strengthen a touch across the board. However, stocks, as you saw this morning, pushing higher. So it seems, you know, hawkish, dovish, stocks do not care, and we're just going to keep going higher and higher. And I'll be keeping another close eye on that 2900. What did the Fed really say? Um, well, if I just bring this, uh, to your attention. Give me one second to find it. I seem to have lost my Fed comments, but yeah, they were talking obviously about the weak growth as well, how they were happy to be flexible and be prepared to move interest rates higher or lower as needed, but those unusual mix of risks, mix of risks mean they could remain on hold all year. However, there were some, uh, voters that, uh, did talk about their potential to be a rate hike to the back end of the year, a cautious rate hike at the back end of the year, and, and the markets briefly moved off that. But I mean, it's the minutes of the Fed, very rarely do you see a long-lasting reaction from those. It's always a course, the, the interest rate decision and the press conference, that is the, is the focus. And just have a look at the snapshot there, you can see very limited, uh, yes, 7 o'clock we saw some hawkish responses, but the reversal from that has been pretty clear, uh, to see. Um, having a quick look as a summary of a whole yesterday, just bringing in the pound because we did have some UK data out, GDP numbers and industrial manufacturing output. Around 9:30. You can see here, if I just circle that time, it was better than expected. We pushed to the high of the— bringing the pound here, sorry. We did push to a high of the day around that point, but it was limited. Brexit's the focus here, so even if there is UK data coming out, of course, you know, the, the market focus is going to be elsewhere, understandably. And that reaction, you can see muted. We are now trading just on that pivot. From a look at today with the House of Commons speech from Theresa May, it might be worth just holding out for that. I think you could have been forgiven for thinking this, this move just around 7 o'clock would be long-lasting, as it did pick up, but only to get choppy. And I know there's better markets to trade, but from a point of view to get short, technically the break of this trendline and this sort of overnight yesterday afternoon support that we hit this morning could open the door further to, to the downside. And of course, that low that you can see bottom left of the picture on the 9th, uh, well, if that was to come into play, uh, and the low from the 8th, where the run down to the low that we had of this month could come quite quickly. To the upside, I think the simple is putting a resistance point at 1.3150. Above that, a bit of free run to the highs that we've got from the week as well. But I think focus should be elsewhere. Looking at the calendar this morning, uh, we've had some, uh, numbers out of Germany, final numbers, so, you know, not likely to have moved the market. As you've seen, we've got the French CPI coming out, or came out 10 minutes ago, and then that's really it. That's really it for the morning. It's going to be a quiet morning. If Super Wednesday was, Wednesday was built up to be, uh, a market full of opportunity Uh, well, this morning is going to be less, less so. Uh, into the afternoon, we've got the weekly initial jobless claims, uh, we've got the, the final demand PPI, uh, year on year, and the core numbers for that, they're coming out at 1:30. So that's always something to, to keep an eye on from the US perspective. The US numbers yesterday were better for the— or slightly better for the core, worse for the main inflation, and the reaction saw a bit of dollar strength right on the ECB decision, uh, and press conference. But again, you know, not way— not too much in the way of movement there. However, one thing we do have today is a fair amount of speakers. So we've got ECB speakers at 1:30, and then a few out of the US, 2:30, 2:40, 2:45, and then 7 and 9 o'clock into the back end of the, the UK day. So from a speaker point of view in the afternoon, while there is a bit of data at 1:30 You can see from then on there's always going to be little periods of time just to be aware of, or maybe put notes on or alarms on just to be alerted for that. The day after the minutes, any confirmation of what was said or any changes to what they think now will be things to have a look on. Also yesterday, uh, you couldn't really expect him to keep his, his mouth quiet, could you? Donald Trump, uh, coming out and tweeting his say on the, the Brexit situation. Too bad that the European Union is being so tough on the UK and Brexit. The EU is likewise a brutal trading partner with the United States, which will change. Sometimes in life you have to let people breathe before it all comes back to bite you. Of course he was going to have something to say on that, as he does on everything. Also worth, you know, on the Financial Times, it was— when I was reading this this morning, it was quite interesting to to see a few comments at the back end of the article. Some leaders warn Britain not to expect further extensions beyond October. At the end of October, we are 6 months down the road. It will be increasingly difficult to grant an extension. That's not even them saying they won't. I think the idea that we can get to October and much will change is still relatively slim. I know it's a lot more time, but, you know, Parliament aren't gonna agree to Theresa May's deal, so it'll be up to maybe May and Corbyn to see what they can do, bring that back to Europe. But if Europe are gonna go hardball on what they want, well, we could be back to October, and then the idea of Brexit not even happening at all is increasingly more likely, which in turn perhaps is then your pound positive. Of course, not with any twists and turns to happen before that, I am sure. So yeah, on the, on a calendar, the point of view, uh, relatively quiet morning. Keep an eye out for Theresa May in the Commons though, as that comes around sort of midday last time I, I checked. I'll confirm that time. Bit of US data in the afternoon, but the speakers will be the main driver. Looking at the, the charts, just to, to wrap up how we're, we are, are trading, uh, yesterday the EUR/GBP 1.30 was the main mover. But it was relatively, relatively, I should say, contained, especially to compared to the last meeting that we had. We've already reversed that, we've already reversed it. Um, looking at where we're trading, if we have a quick look at opportunity-wise, the high that we almost made yesterday, uh, but from the 27th is still a key area that I'd like to see us, uh, test. And depending on the, the strength or weakness of the dollar, that with R1 does look like a good place to get long. Uh, the trend line we talked about yesterday, you can see, held up, albeit with a little false break, but that comes in around just above the, the S1. And potentially when price gets down there, it would of course be higher up. But still, for that, uh, continuation, if you like, of dollar strength or euro weakness, I would prefer to see this go than perhaps looking to get too aggressively short around here. AUDUSD briefly weaker overnight, but we're still above the, the range that we broke through. You can see that on Monday, holding, uh, Monday, the, the break, uh, acting quite well. And, and yesterday, the retest of that and the pivot and the overnight high— what was the overnight high— working good. And similar sort of pattern today. I'll be keeping an eye on that pivot. Second test of that might lead to some dollar strength and breakthrough But as long as equities keep going, the Aussie, I believe, will do so as well. Looking for a continuation higher. You can see the trend line coming on from those highs working quite well. The yen, as a sort of recovery of US stocks last night, uh, did weaken. Um, and you can see again, similar to that euro, every time we look to sort of get away, keep an eye on these trend lines that form. We're just looking just to come back down and almost make that third test of this level here. So this is something I'd be, uh, keeping an eye on, how we perform around this level. Also a key point from the higher the 9th, or the morning of the 9th, and low the 10th morning. It's a really key potential support area. I mean, my personal bias would be to look for this to break down, but as a support area goes, it's not too bad. Stocks in the US, that recovery, uh, into overnight and a bit this morning 2,900, massively important in the S&P. I think yes, you could still get a bit of a push lower, but at the moment this market is going higher. And I feel while there will be short-term intraday moves to get short, you've just got to go with the flow. Just got to go with the flow. Potential to, to get long S1 looks good technically, but of course if it's on that cash open, almost wait for that false break before getting in, which has been the, uh, the trade of the last two 3 days there as well. The NASDAQ performing stronger throughout the day, and, and that has pushed on to make a new high for the year this morning. And if we just put this on that longer chart just to have a look at the percentage we are away from an all-time high— says, you know, Trump can just get ready for that— we are 1.15% away. I mean, they could easily do that today. Or by this week. Having a look at oil, longer picture, that 65 handle, the 65.73, still very much, uh, tradable to reach. But as a short-term resistance, as I've mentioned, I do like the look of it, uh, at least for an area for the big players to take some sort of profit or anyone to get short. Interestingly though, again, the reaction to the DOE was overall by the end of it a bit positive. And this has been the case when there has been, you know, negative news. And the build yesterday was 7 million, so more than expected, a big build. The market hardly pushed lower. In a— oh, and it takes you back to say the S&P 2017. Any bad news, buy the dip. If there's a reason oil comes lower, we'll get in and buy it if it's going to go higher. While it's a key resistance and we failed yesterday to break above the high of the year, Uh, just from a sentiment point of view, that is quite key. So I could see that we, we could break through, uh, those highs, uh, eventually and get a test of 6573. But that remains to be seen whether that could be this week or not. Having a look at gold, the, the, the dollar yesterday slightly weaker into the morning but then stronger. Then stocks were coming down. Gold, uh, did eventually break through into the back part of the day. However, we are just drifting a touch lower. Gold, quite good with the trend lines, and you can see there's one starting to almost have formed this morning. We had a bit of a false break above that this morning, but that still would be something I'd just have a look at for potential area to get long should we, we hold back above the support area. For now, previous high of yesterday, so you can see a good technical level there. Break through that, then there might be a bit of a free run, but for now contained within those parameters. Any questions, as usual, please do let me know. I'd expect it to be a relatively quiet morning, to potential to pick up, um, around sort of midday into the, the back end of the session. Brexit October delay, and if you have a look at the pound, it's already back to where it was just before we started the briefing. I hope you all have a good day. The Masters starts today, so let me know who you've got, who you're backing, uh, whether the, the UK can beat the Europe. Will be one to keep an eye on as well in that. Hope you all have a great trading day, and I'll catch you all later on.