MARKETS STEADY AS BREXIT NEGOTIATIONS UNDER WAY
All was quiet in the currency markets Monday, as investors braced for the start of Brexit negotiations between the United Kingdom and European Union (EU).
The UK voted to leave the single market last June, but didn’t formally notify Brussels of its intend to exit until just a few months ago. Prime Minister Theresa May called for a snap election on 8 June, which ultimately backfired in her bid to secure a bigger mandate ahead of Brexit talks.
Brexit Secretary David Davis, who was appointed after Mrs. May was selected to replace David Cameron, says there was a “long road ahead.” He nevertheless predicted a “deep and special partnership” with the rest of Europe.
Many traders aren’t so sure that’s the case. The British pound has crashed and burned in the wake of Brexit, and at one point sunk to 168-year lows against a basket of global currencies.
The British pound was little changed ahead of the European session.
The euro traded slightly higher on Monday and was last seen trading around 1.12 US.
The US dollar index, an exchange-weighted average of the greenback against a basket of six currencies, was flat.
In commodities, gold prices drifted slightly lower on Monday, as precious metals continued to unravel after last week’s selloff.
In terms of economic data, the European Commission’s statistics agency will report on Eurozone construction output at 09:00 GMT. Output fell 1.1% in March and was up 3.6% from a year earlier.
In terms of monetary policy, a pair of US Federal Reserve governors will deliver speeches on Monday. Fed Bank of New York President William Dudley will speak at 12:00 GMT. Eleven hours later, Chicago Fed Bank President Charles Evans will also deliver a speech.
The British pound is subject to greater uncertainty in the week ahead, as traders shift their focus to Brexit talks. The 1.28 level continues to offer resistance, although traders appear keen to take prices above that critical level. In the event of a pullback, the 1.27 level is likely to offer a good base of support.
The euro ended the week on a positive note, as prices shot back up toward 1.12. However, new yearly highs remain elusive at this point, as the market continues to fixate on fundamental forces tied to the euro.
Precious metals were off to a soft start on Monday, with gold prices falling toward $1,252.00 a troy ounce. Bullion has been in reversal mode since 6 June, when it approached $1,300 for the first time in nearly two months. The outlook appears to be slanted to the downside. However, traders can expect a quick rebound should a deep dollar discount encourage market participants back into the embrace of precious metals.