Summary:
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Risk sentiment boosted by de-escalaltion in Hong Kong
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Pound recovers despite soft PMI data
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MPs to vote on no-deal bill this evening
There’s been some sizable gains seen in European indices this morning, with stocks rising as sentiment improves on hopes that the civil unrest in Hong Kong could be coming to an end. News that Hong Kong chief Carrie Lam is set to withdraw the extradition bill that was the main catalyst for the protests to begin three months and there’s now growing optimism that the rising tensions will begin to dissipate. The FTSE has regained the 7300 level in moving up to its highest level in a month and after a turbulent time of late, investors will be hoping that stock markets regain their poise now that the summer months are over.
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The UK100.cash has reached its highest level since the start of August this morning and in doing so the market has moved above the 38.2-41.4% fib region from 7290-7313. The 8/21 EMAs are also converging and could be on the brink of posting a bullish cross. 50% and 61.8% fibs are potential levels of interest above at 7374 and 7458 respectively. Source: xStation
More soft UK data but GBP attempts recovery
After falling below the $1.20 handle yesterday there’s been a bit of a bounce in the pound despite some more data pointing to a slowing UK economy. For the third time in as many days, a leading industry survey has come in worse than expected, painting a rather bleak picture of economic activity. While the Services PMI reading of 50.6 remains just above the level that would signal contraction, an all-sector PMI has now fallen to 49.7 which indicates a negative GDP print for Q3 is probable. The release has caused a bit of a pullback in the pound, but after the early weakness yesterday the currency seems to be seeking to carve out a bottom around these levels.
MPs to vote on no-deal bill
In winning a vote to control the Commons timetable by 328 to 321, MPs opposed to leaving the EU without a deal have wrestled control of the parliamentary process and will later seek to pass legislation to prevent a no-deal Brexit. Given the size of the margin it seems probable that they will succeed later on, with a bill that would compel the PM to delay Brexit by another 3 months if he can’t agree a new deal with the EU. The situation is becoming increasingly absurd with Boris Johnson now likely to seek a snap election - which would be the 3rd in 4 years despite the fixed term parliament act - while the opposition are cautious to go to the polls. Overall this is seen as good news for the pound, with no-deal prospects beginning to recede once more and while we may remain stuck in a political quandary for some time yet, at least the worst case scenario seems to be becoming increasingly unlikely once more.
After falling lower yesterday morning the GBPUSD recovered to post a bullish hammer (of sorts) on D1. Positive divergence seen on MACD and the market is now some 200+ pips from the lows of 1.1957. Source: xStation
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