Asia Pacific Market Open Talking Points
- British Pound tumbles as series of Brexit amendment votes spook investors
- Australian Dollar follow-through on CPI report may have to wait until RBA
- APAC shares may trade mixed, Nikkei 225 overshadowed by reversal pattern
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The British Pound was the worst performing major on Tuesday as a series of Brexit amendment votes spooked traders. The UK Parliament voted to reject Amendment B. In short, this would have sought to delay Brexit should Prime Minister Theresa May fail to secure a deal towards the end of next month.
What did pass was Amendment N, proposed by Graham Brady. This seeks to replace the controversial “Irish backstop” with “alternative arrangements to avoid a hard border” between the Republic of Ireland (an EU member state) and Northern Ireland (a part of the UK). However, moments after the vote, an EU spokesman said that the agreed-upon Brexit deal was not open to renegotiation. Later on, this was reiterated by French President Emmanuel Macron.
Given these complications, markets seemed to have interpreted the day’s events as increasing the odds of the UK exiting the European Union without a deal. Not surprisingly, the US Dollar rose with declines in Sterling but only ended the day cautiously higher. In fact, apart from the British Pound, the major currencies were rather mixed against the backdrop of another volatile day in stock markets.
The S&P 500 closed 0.15% lower while the Dow Jones Industrial Average ended the day 0.21% higher despite bearish reversal warning signs. Markets may be struggling to choose a direction given the remaining event risk this week. This ranges from US-China trade negotiations to the Fed rate decision and prominent local economic data. Speaking of, US consumer confidence sunk to its lowest since July 2017 today.
Looking to Wednesday’s Asia Pacific trading session, the Australian Dollar may look past domestic inflation data for more prominent fundamental themes this week. While it may inspire near-term volatility, lasting follow-through would probably have to wait until the RBA gives a monetary policy update next week. Meanwhile, the Nikkei 225 is also at risk to a bearish reversal pattern.
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