Pound surges on Brexit delay hopes; Stocks remain near highs

Summary:

• EURGBP hits 21-month low as May paves the way for Brexit delay

• Where next for the Pound?

• Stocks recover after strong US data; Powell has little impact

• DE30: BASF gains in spite of mixed earnings

• UKraine CB finish pilot programme on crypto

Prime Minister Theresa May has opened the door for a delay to Brexit by telling House of Commons that should they fail to approve her new re-worked deal next month. The move represents a significant climbdown from her previous stance and is really an admittance that the strategy of hoping to force parliament to choose between her deal and no-deal due to time pressures has been abandoned. EURGBP has dropped below the 0.8620 level to trade at a 21-month low today. This could be seen as a significant break below key support and if it sticks then it opens up the possibility of a significant move lower.

The long and protracted Brexit saga which began in earnest in June 2016 when the UK voted to leave the EU has made some potentially significant twists and turns in recent days, as the March 29th deadline for the country to leave the bloc draw ever closer. Since UK PM Theresa May saw her deal rejected in a “meaningful vote” last month, there’s been steady gains seen in the Pound as traders appear to be betting that a no-deal Brexit, which would be the most negative for Sterling, is becoming increasingly unlikely. The markets have been wrong on Brexit before, with the rally ahead of the referendum catching many off guard and should the threat of a no-deal increase significantly in the day sand weeks ahead the currency would be susceptible to a large decline. For more analysis on the pound please view here.

The tone adopted by Jerome Powell during his testimony before lawmakers on Capitol hill was in keeping with his recent communications, as the Fed chair providing no great shocks on the policy front. Elsewhere in the US there’s been a couple of data points worth touching on, with the latest look at consumer spending delivering a pleasing beat while housing figures were mixed to bad on the whole. The US500 printed a shooting star on D1 yesterday - coincidentally at a similar level to the high seen in early December after the first time the US postponed tariff increases on China. 2824 remains potentially key resistance. Price remains above the 10 day EMA as it has for the bulk of this move higher.

BASF (BAS.DE), the German chemical company, released earnings report for 2018. World’s biggest chemical producer managed to generate revenue of €62.675 billion, 0.79% above median estimate provided by Bloomberg. On the other hand, BASF failed to meet analysts’ expectations in terms of earnings - EPS of €5.87 was around 1% lower than consensus forecast. Nevertheless, the stock is trading higher today. Words of Martin Brudermueller, CEO of BASF, can be named as a reason. Brudermueller said that in case trade conflicts ease this year and the economic consequence of Brexit would be limited, it is likely that the company will get back to profit growth.

Most of major cryptos have been moving rather flat after Sunday’s losses. The two largest cryptocurrencies - Bitcoin and Ethereum - managed to recoup only a small part of their previous falls yesterday. The National Bank of Ukraine (the country’s central bank) announced that it had finished a pilot related to a digital version of the Ukrainian currency called the Hryvnia. Alexander Yablunivsky, the Bank’s director of payment systems, paid attention to a fact that a pilot project had not been related to a cryptocurrency, but to a digital currency (a cryptocurrency could not be issued by a central bank). Moreover, the Bank said that it would continue its research over potential use of the mentioned digital version of the country’s currency. Note that Ukraine started its research aimed at using blockchain technology in 2016.