Asia Pacific Market Open Talking Points
- GBP/USD[1] already fell before third vote on May’s Brexit deal was blocked
- Sentiment improved, placing the S&P 500[2] closer to achieving record highs
- Risks for AUD/USD[3] tilted to the upside on RBA minutes, Yen may weaken
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Key FX Developments Monday
The British Pound[5] was the worst-performing major currency on Monday. Newswires attributed this to John Bercow, the Speaker in the House of Commons, blocking a third vote on Theresa May’s Brexit deal unless there are major changes to it. Looking at the immediate chart below reveals the full story behind volatility in Sterling.
GBP/USD vs. US Dollar and US Bond Yields
Chart Created in TradingView
When Mr Bercow’s block crossed the wires, GBP/USD had already been drifting lower. This was partially due to a slightly higher US Dollar[6] that trimmed losses from earlier in the session. The Greenback appreciated alongside front-end government bond yields, suggesting ebbing dovish bets ahead of this week’s highly-anticipated FOMC[7] meeting. In fact, the risk for USD[8] on the Fed may be tilted to the upside, posing as a risk for certain ASEAN currencies[9].
The S&P 500 still edged higher, building on top of a major resistance break from Friday’s session. Now that there is confirmation of a second close above 2824, the index is another step closer towards achieving a new record high[10]. Still, negative RSI divergence persists
