UK Parliament acts to block 'no deal' Brexit

Good morning, it is 4th of April, Thursday. Hope everyone is well. Well, I hope you are feeling better than I was this time yesterday for sure, but good to be back. Seem to have shaken off a short-term bug. But yeah, I'm— I was here definitely on what, Tuesday night, when I saw the news break in regards to the latest being Theresa May looking to start conversations with Jeremy Corbyn about trying to find a way forward. And I did see the pound shoot higher at the time. So it was, um, yeah, interested to see. And I'll run you through some of the updates of what has been deemed as constructive talks in which they held yesterday, and they're going to be talking again today. Otherwise, a couple of other articles to do with China, and we've had some data— that's what I'm showing on my screen at the moment— which is the industrial orders or factory orders coming out of Germany earlier this morning, and they were particularly weak. And that will explain a little bit of the pop lower that you've seen in the euro this morning. Just having a look at the overall kind of composition of the charts, if you like, this morning, relatively muted, I would say. Cable, minor positive, I guess, for cable. This is about just now holding on to a big portion of the gains that were seen since those comments broke. I mean, that was when I was here. Yeah, on the 2nd, so 2 days ago. And it shot higher. This was just after 6 PM, and I can see it's kind of continued higher and held on to those gains. Importantly, it's definitely, in summary, and we'll get into some of the details, but leading the way towards potentially a softer Brexit. I was slightly surprised when that comment came out, must admit, on Tuesday night, and I think the market kind of reflects that in the way it moved higher because I thought, you know, Theresa May would have just stuck the course for a little longer, knowing she's got about another week's wiggle room, but that's come sooner than anticipated. But certainly, we'll have a look. No deal looks pretty much off the table. There's some kind of procedural elements to go through the upper house, the Lords, for last night's vote to be ratified, but it's looking ever more likely that we're going to get this extension now. Otherwise, elsewhere, let's just have a look at the euro. So make this chart a bit bigger and let me just narrow down the time frame a little bit here. This is a 5-minute chart because I just wanted to really show you that blip that we had at 7 AM, so just as I was coming in, and this came after German data. So German industrial orders dropped unexpectedly by 4.2% month on month. Expectations were actually for a positive 0.3% reading I believe the lower bound of what the Street was looking for was for -1.4% and it came in at -4.2%. So much weaker than expected. As you can see here, looking at the 12-month picture of this particular data set, this is by far the worst that we've had in the last year. So if you stretch that out, this is what it looks like if we start pushing back the timeframe to encapsulate the last 5 years. And as you can see here, you've got to go back to really 2017, the last time we dipped these kind of lows. So yeah, more evidence of economic struggles being experienced in, uh, the most important economy in the eurozone, and the net reaction being then a fairly forceful move lower. However, we have already recovered about 50% of that move and really come back within to that range that was seen during most of the Asia-Pacific session and where we closed last night. I guess to a certain extent, although this is weak data, let's not forget that markets are fairly set now of an awareness of the German economic stress that's ongoing, given the manufacturing PMIs that were such a disaster about 2 weeks ago. So maybe some of the downside surprise element has been removed to a certain degree, and that might explain why prices have held up. So you get the knee-jerk reaction, but you don't get a continuation of the move in that respect. Otherwise, looking at the other asset classes, I mean, one thing I'm kind of just seeing this grind away, and we, you know, Sam and I have been quite persistently bullish with the equity market in the US for some time. I can see there's a couple of markups here still on the on the chart, possibly from what he was looking at before. But it was a lot of signals here going off, and in response to technically and fundamentally, I'm going to discuss in a second that US-China trade update. But that's obviously proving to be a net positive. The change from the Fed, there's another article talking about how China are going to unveil even more stimulus action. The risk of Brexit no deal has now all but gone. So all of these different things are all supportive of this directional play. And having broken above that key area, which was really here, a resistance, you can see how the markets use that as a bit of a floor, and we continue to remain on the front foot. So yeah, if all things remain the same, I do expect us to continue over time to drift higher. I guess 2900 the psychological handle is probably the next big level, uh, coming up. 0.075 being the kind of relative low that was seen on the 27th, 26th period of September last year. These would all be targets on the upside. But yeah, that Golden Cross technically, that indicator which happened a few days ago, uh, the shorter-dated DMA crossing over the longer time frame 200 DMA, uh, that trend line as well was worked out to the tick almost on that initial pullback on the 25th. So still remaining fairly bullish in that, in that sense. Oil as well, I guess, warrants a mention. Just while I was off, I still had half an eye on Twitter yesterday and I could see people were talking about Brent getting close to 70. And, you know, in step, I think, is a fairly correlated move between equities and oil because of this whole connection of this global growth concern that we were seeing initially from policy tightening, which saw, you know, one of the main reasons for the, you know, the large-scale sell-off that we had at the end of last year. But if you were to map the S&P over this on the same kind of time frames, you know, it mirrors it quite nicely. And I think as well, exactly the same reasons that we see potentially continuation of the upside in equities. It's the same case for oil. I think now oil's got to this point with WTI. I guess Brent's got to make a clear break of 70, and if that is the case, then this kind of logical target up around the next fib level on these previous lows last summer seems a kind of an appropriate target for the upside as the next kind of obstacle barrier of resistance if we were to push any higher. All right, let's just get into some of the news then. The pound, as you can see here, as of this morning, not really seeing a great deal of movement, fairly sideways price action. But let me get you up to speed of what exactly has been going on. So here it is: UK Parliament acts to block a potentially chaotic no-deal Brexit. It's been reported in Bloomberg this morning. So May and Corbyn will continue intensive talks to seek a compromise. The House of Lords to debate the bill passed narrowly by Commons. So let me just show you exactly what this looks like. So this is the, uh, the MP votes from last night, and Commons backed Brexit delayed bill by one vote. So it wasn't exactly decisive. As you can see here, absolute sea of blue because this is where the Conservative members more, more so— I mean, there's obviously a few here that would have switched, that would support a customs union, but it's this idea of the customs union that creates such distaste amongst particularly the Brexiteers, of which two— I think it was the junior Brexit minister and the Minister of Wales— did resign yesterday in protest of what's been happening with May saying she's going to open dialogue with the opposition. So important thing here though is that it did go through regardless of the slim majority, which could carry then some implications for this deal going through in, in the medium term. For now though, this has gone through and this will now go to the Lords. And I haven't really read completely into it this morning, but my thoughts initially just reading this on the train on the way in is that, well, the House of Lords tends to be more remain-minded anyway, so If this is the vote of the lower house, I would expect that to be ratified by the upper house. And that meaning then that we need to find whether or not May and Corbyn can come up with something more constructive and more detailed about this customs union issue. If that is the case, going back to Europe before next Friday saying, "We're gonna need more time to thrash this out," that getting approval, and hence then we talk about this longer-delivered, softer Brexit. A couple of other points here then from the FT, just to summarize this event. So both Downing Street, the Labour Party, held or hailed the talks yesterday as being constructive. The two sides have agreed to appoint renegotiating teams for a full day of discussions today. So it's going to be more tweets as per usual. Keep an eye on the usual suspects on Twitter, the political correspondents. They'll be giving you the latest scoops, I'm sure. The Prime Minister says she wants to agree a common Brexit approach with Labour ahead of that now kind of Brexit deadline, which is April 12th, next Friday. Interesting comment though came out of the Attorney General, and if you remember, he was one of the key players which caused a lot of pound volatility a few weeks ago when it was up to him whether or not he would put his weight and ratify May's original deal. And of course he didn't. Now, Geoffrey Cox has said yesterday that the UK could sign up to a membership of a customs union with the EU on a temporary basis. And I think that's quite important. So Geoffrey Cox said that while a customs union was not desirable, he would opt for it if there was no other way to leave the EU. He added that this would not be a permanent straitjacket on the country. So that definitely helps Theresa May, I think. He's quite an influential person. And this terminology of saying that it would not be a, quote, permanent straitjacket is probably aimed directly at the more Brexiteer-minded Conservative MPs. Now, just so you're aware, the existing May deal is that the UK is already scheduled to remain in the EU's customs union and single market until December 2020. This is that transition period which they've already secured about 18 months ago. That could then potentially roll on up to December 2022, has been some of the talk again a few months ago. Many Conservative MPs though remain firmly opposed to any kind of customs union. As a refresher, only 37 of them backed such a measure in votes in Parliament on Monday. So, you know, some substantial ground to make up if that deal is to be tweaked in such a way and to get over the line. So yeah, that's pretty much it with the Brexit situation. As I said, the pound, um, importantly, I think from a, a broader perspective, it's held on to the near— what, it must be a 1.4, 1.5% appreciation now that we've had since that initial headline came out. So as such, I think that's the important factor here. I do think there's Um, well, there's two ways you can look at this, I guess, if you were trying to put it in a more binary trade point of view. And one is we get more positive signs that some headway is being made with these talks, and they're going to be going on throughout the day. Anything that would show that is the case, well, then you've got the R1, which— and the previous day's high, that's going to be your main upside target resistance. Any break of that, and you can see here on that previous high back on the 28th, might add as a bit of a platform then for the next push higher. On the flip reverse though, if we did get a breakdown, we continue to remain at an impasse. Remember that the kind of stopwatch is ticking and the countdown is next Friday, and so it goes back into the same kind of phase. If if we continue to remain without significant progression, then you would expect this pound probably to start retracing some of that move. Not today specifically, but as the days this week and the next go through. The other consideration, I guess, as well, from a medium point of view, medium-term time frame, would be you've got non-farm payrolls coming out tomorrow. And if that came out, let's say, weak on the wage component, low jobs again— remember, it was 20,000 last time out— forget something similar again. Not that I'm expecting it to be the case that low, but if that were the case and you get dollar weakness and positive developments on this customs union talk between Conservatives and Labour, that could act then as a, as a decent fundamental trigger to play both sides for us, for see a meaningful push back up the kind of 133 area, I'd say. Okay, well, let's move off that and let's talk a little bit about the other big story. And this is one talking about the trade, ongoing trade negotiations between the US and China. Of course, this is still ongoing. The trade deal that the US and China are crafting would give Beijing until 2025 to meet commitments on commodity purchases and allow American companies to wholly own enterprises in the nation, according to people familiar with the talks. So again, these are source comments in Bloomberg, but typically these source comments tend to be, tend to be true, and they're kind of just drip-fed into the press. Talks are continuing in Washington today. I think they, they began yesterday. So the Chinese Vice Premier is going to be meeting with Lighthizer and Steven Mnuchin the Treasury Secretary later. So do keep an eye out for any comments as we go into London time this afternoon. The goal here is that they're just trying to ratify agreement on the core issues, and then Trump and Xi Jinping could hold a ceremony to sign a deal. But unlikely that's going to happen anytime soon, but that's what the end game is. Now, one really interesting thing about this particular negotiation is this, this section here, which is: under the proposed agreement, China would commit by 2025 to buy more U.S. commodities, including soybeans and energy products, and would allow 100% foreign ownership for U.S. companies operating in China as a binding pledge that can trigger retaliation from the U.S. if left unfulfilled, according to people who spoke on condition of remaining anonymous. So yeah, I think this is really interesting on really two big levels. One, first of all, 100% foreign ownership of US companies operating in China. I mean, that is unprecedented. I mean, we have Amplify Trading as a company, we have an office in Shanghai, and I can't begin to tell you how different it is to get a company set up in China and to operate it in it. It's just so radically different being a foreign firm operating domestically within China. So that particular concession, if they did get that from China, I think would be a big one. The other point here is the White House is particularly focused on purchases and purchase commitments through the second quarter of 2020. And what does that tell you? Well, that is absolute genius from Donald Trump, because that's in an effort to narrow the trade balance in the run-up where he will be going through the pre-election campaigns into November 2020, where he'll be running for the president role again. And the US is even going as far as pushing for China to front-load a big chunk of commodity purchases in the first 2 years of the agreement. So again, without sounding like a Trump fanboy, I think the guy's just done it again. This is, this is really quite a strong tactical move, I think, to safeguard the economy, which we know that he uses as a weapon, you know, to kind of resonate with his voting base. And he is probably fully aware that, you know, the economic cycle is probably warranting at some point in the next 18 to 24 months a recession risk, as we've seen with the recent inversion of the yield curve. But by propping up front-heavy, front-loading of China buying agricultural goods from the US, could he manage to get through that? And, you know, the best genius part of it here is that he's talking about a trade deal that goes on basically all the way through his second term and then finishes. So he basically preps it up, gets himself another term, it then runs throughout his term, and then by that point he hands it over, and then the trade deal as they exist at this point, um, finishes. So does this have long-term benefit for the US? You could argue probably not. Is this good for Trump and the US economy in the short term? Probably yes. And so, you know, Trump's kind of getting his way again, you could argue, in that extent. The point that's holding up the complete sign-off of these talks at the moment is the two sides are haggling over how to enforce the deal. A person familiar with the text said China so far agreed only to contemplate not to retaliate if the US took action against Beijing. But stopped short of a formal pledge to refrain— refrain, excuse me— from counter punches. So again, that would be absolutely key, I would imagine, for the US to sign this off. They'd want something in writing saying about not coming tit-for-tat again, going back and, and so on. There's an article here that's pretty good with more details. It's going in the chat now. I suggest you take a read when you get time. The other thing as well Final article for me, then I'll hand you over to Sam, and it's this one: China is preparing more stimulus measures to aid consumption recovery. Now again, I think this is important because this also plays into not just Trump's hands, but it plays into the equity and oil bulls' hands because it continues to keep that kind of risk at bay of any type of economic growth concerns starting to grow any— or grow any further. So China has offered new measures in the form of reduced taxes to raise citizens' wages, ramping up already ambitious plans to boost domestic demand. So again, it's just more ways in which China is kind of, you know, opening up the coffers and trying to help not just stabilize but get the Chinese economy back on track. And remember, it was what, only 5 days ago that we saw that manufacturing PMI importantly popping back into contract or expansionary territory above 50. And I think that's really important for this week and what has helped this kind of more renewed risk-on, um, risk-on sentiment for markets. Okay, um, that's it from me in terms of the, the kind of schedule for today. And what we do have is pretty quiet morning overall. You've got the ECB minutes are coming out at 12:30. You've got the weekly jobless claims coming out from the US later on this afternoon. I would be mindful of keeping an ear out. Meetings said to be ongoing throughout the day between May and Corbyn's teams. And then you've got predominantly Fed-related speakers, but not until afternoon and early evening for Fed's Williams, who is a voting member, is going to be speaking at 2 PM. Fed's Mester and Harker at 6 PM. And then for any Bund traders, you have supply coming out, fixed income auctions coming from Spain and France, a fairly hefty amount, looking at €2.5 to €3.5 billion from Spain, about €7.5 and €9 billion coming out of the French Tresor this morning. All right. Have a good day and I'll hand you over to Sam.

Thanks. Hi everyone, good morning. I hope everyone had a, a good evening. Uh, we'll take a look over the, the S&P to, to begin with. As you know, we just perhaps stalled a tiny bit this morning. If you squint closely, you'll see a bit of red on your, your daily chart, but Having broken above the 2865, I think we probably see a further grind, a continuation of that, maybe, you know, looking at that 2900, uh, the back end of the, the week, end of the day tomorrow. Obviously non-farm payrolls may have something to, to say about that, but as long as we're above the, the higher previous high of the year and that 8th of October low, I think you've got to remain bullish in the this market and see it as a, as a matter of time before we really get down to test that. Looking intraday, potential places to get in, uh, the previous high, uh, that we had this week isn't the worst idea. Yes, we did sort of snap back through it, but around 2873 on the futures isn't the, the worst place in the world, I think, to, to look for an area of support. Having a look back at this, this trend line again that we sort of, uh, did falsely break. We're just finding a bit of support on that. So depending on how we come down to test that trend line again would make me want to either not or take the, uh, this area of support. So for now it's holding. And also trend line from the, the high of the year down to the high of today, just wanting to see how price potentially gets squeezed in there before either breaking to the upside, which I would favor, or if we have a slow grind lower, looking for a bit of support lower down. Similar sort of pattern, uh, for, for gold. Looking at the previous highs, just going back to the 29th, you can see we're just, you know, testing all of that now. Also from the lows, price just getting squeezed in, um It's a tricky one for gold as well. The, the low that we had on the 2nd, that sort of trend line that matches up with the 24th of January low as well, that's found decent support. I wouldn't— I'd still keep an eye on that level for any sort of potential break, looking to get down in the futures anyway to around sort of 1275 area. I feel that could still be a point to keep an eye on. But the way this may work, R1, break of the trend line, you know you know, significant close above and, and targeting the high of yesterday could be a decent option. But also I would be keeping an eye on this, this point around here, around the pivot. We've had a decent sort of test of this trend line multiple times, again almost this morning. So a break of that, you could see a further extension to the downside, something I would be just having marked up on the chart. Euro, decent push higher yesterday, really coming through through the, um, the sort of this sort of time yesterday where we got the, the break of the, the sort of the trend channel that we had been in. You can see the retest, uh, worked quite well. And also this morning, uh, yesterday morning you had the, uh, break of this trend as well, which actually is really strong support. So technically quite good when there's been a break either direction. I'll just clean those up again. Uh, so pivot lows of yesterday afternoon, that should be a pretty significant area if you are bearish this market, which understandably you absolutely could still be. It might be that you're looking for that point to go around the pivot, around the low of yesterday afternoon, which was that previous high of the morning around sort of 7:30, 7 o'clock. A break below that, I would say the bears are back in control. Trend line from yesterday's high, you can see, is, is pretty choppy already. Had a little false break there up to the, the high of the day. So key area, I'll almost remove your trend line now and just sort of say, uh, have it, I should say, as the high of the day above that. Then you might see a bit of a further push and quite an important resistance point, uh, just above the R1 that we're trading, that high of the 28. So by no means is this euro completely out the woods. And if we were to get below the, uh, the pivot, I'd fancy a short in this market. Uh, having a look at the yen, uh, pretty range-bound for the last couple of days. You can just see here, if I just bring out the, the rectangle, hardly anything's really gone on here. Slow-paced market, uh, which kind of resembles equities yesterday. Not too much going on then. And as long as equities grind higher, I favor this market to, uh, as well push, uh, to the downside. Worth keeping on this trend line from those lows, uh, that we, we talked about again yesterday in the briefing. A break below this, you could see a further push to the downside. However, decent, decent push off that yesterday morning, early morning, and you can see we're now a fair bit above it. But that would be something I'd have marked up potentially later on. Can we get down to this trend line and and break through, and then you start to see a further extension. And the, the low of the 15th and low of the 5th of March would be obvious targets for that. If we were to grind higher in the end, uh, potential place to look to get short— you can see R1 doesn't look too bad. You've also got the low of the 1st of, of the month, April Fool's Day, before we had that breakdown, as well as a decent zone to, to be aware of. As Ant mentioned this morning, the, the pound is, is pretty flat, not too much going on. Yes, we're just above where we, we opened the day, some interesting resistance that we've had all week, and then going back to the 28th as well. We didn't quite get there yesterday morning, um, but that is definitely a point I would have marked up. Bullish above there, uh, sellers in control, the R1, yesterday's high, and that higher, the 28 now, um, and that's just from a technical point of view. And it does feel if we get through there, bit of free room perhaps to go to the top of the next range at 1.3322 on the futures. Um, the key levels to the downside— I mean, it's the pound, so you've got to be half careful— but previous high, the first, second, and those sort of lows that we had yesterday around the pivot and the 1.32 handle. If I was looking for line in the sand, that would be it. However, you know, trading this too technically can always leave you in a bit of trouble as well. Aussie dollar, worth keeping an eye on here, is as we've sort of formed this new range from those highs, you can see the trend lines relatively well respected until we had a bit of a breakthrough yesterday and it started to get slightly more choppy. I'd almost lower the time frame down and bring up this new range here. So you can see from those highs almost coming into this sort of flag here, worth keeping an eye on. I prefer, I think, considering the direction that we've come, the, the upside break of this. But again, waiting for it to come either way, uh, before making a decision. We almost— oh, we did actually have the complete reversal of the, the RBA move. And if you think RBA, ECB, Fed within a day or 2 days we've had complete reversals of those. Not too surprising, of course, but really key resistance point from there, from that high that we had back on the, the second and first triple top around there. So if we can get that push higher, there's obviously going to be stops that get triggered above those highs, and you can imagine there'd be a decent push to the upside as well. That would have been a really nice short actually yesterday around sort of half 5 to have got in on that sort of first retest back. But yeah, not to beat. If not, uh, taking that, I'd be focusing on maybe a push higher up. It seems in the futures it can come in around sort of 34 and looking for those highs to go as well. Having a quick look over at oil, um, interesting DOE yesterday. I was, uh, traveling, I was walking over to the other office to deliver a lecture and saw it blip a bit lower to then go higher. Uh, pretty unusual reaction, I guess, for it to snap back. I know it was a bit of a mixed reading, but then not too surprising, I guess, to see 30, 40 minutes later it did come back to test those lows. However, decent buying around that area, so something to have marked up. $62 future, S1, yesterday's low, previous sort of highs from before, really key level to to keep an eye on. One sort of trade I do like the look of in, in the mornings for oil is when you start to get this slow— as obviously the volume is lower— gradual grind to the downside. And it didn't quite happen today, but the risk-reward is pretty decent. So I still sort of have this marked up as a trend line from those lows and having a look to see if we can get back above there for any decent push to the upside. At the moment, this market still very much is in an uptrend. So what's going to make that, that turnaround? Probably nothing for now, whether this be a sort of short-term, uh, high or not. Obviously key level for going back to those levels in November, but it's still potentially a bit of room to go. Yes, S&P just has slowed down a bit. Yes, oil has as well. But if anything is to go by from recent trend, that's just mere flip in an otherwise consistent push higher. Having a quick look over the, the general picture for now, you've got the DAX, which as we look at just a longer term, made that high for the year yesterday. I remember, well, was it someone in Stage 4? Of course, Colin reminded me that back in, I'm tempted to say November, and I remember doing the briefing about it, there was a an article, uh, in the FT, and I think it was HSBC was saying they were looking to start investing into European equities. And you can see pretty much since the turn of the year— I know a lot of equities have done this, but what a move it has been from, from those lows. The weaker euro obviously helping things out there as well. But yeah, such a sharp push higher in the DAX, and the pivot for now didn't quite make it, but you've got to imagine there would be a bit of buying just below that as well, where we did have some support for those that do trade it. The Bund, interestingly, along with, uh, T-notes, just pushing above their highs of the day, uh, comfortably above the pivot. T-notes, a bit of resistance going through now from yesterday afternoon. So a bit of, uh, risk-off in the market, although equity is not really buying— or selling, I should say— into that for now. Any questions, as usual, please do let us know. But if not, I hope you'll have a great trading day and look forward to non-farm payrolls tomorrow.