Macro economics

Analytics on 18/10/2019. Investors focused on the vote in UK Parliament

European stock markets are trading mostly lower on Friday, as investors brace for a Brexit vote in the UK Parliament due tomorrow after Prime Minister Boris Johnson agreed a new deal with the European Union leaders on Thursday. The uncertainty is due to the fact that the Northern Ireland’s Democratic Unionist Party has affirmed that it will vote against the deal.

Meanwhile, China posted its weakest quarterly economic growth rate in three decades, underscoring investor concern over global economy. China Q3 GDP came in at 6.0%, the weakest pace of growth since 1992. Weakness in the auto sector after French carmaker Renault SA cut its full-year sales forecast, added to the negative sentiment in the regional markets.

Against this backdrop, UK’s FTSE 100 adds 0.03 per cent to 7,185, Italy’s FTSE MIB is flat around 22,379, France’s CAC 40 sheds 0.42 per cent to 5,649, and German DAX 30 rises by 0.10% to 12,667. Meanwhile, US stocks index futures point to a slightly lower open ahead of earnings from Coca-Cola, American Express, State Street and Kansas City Southern.

In currencies, the dollar is marginally lower against the majors, with EURUSD extended gains to the 100-DMA around 1.1130 which seems to be capping further upside attempts and serves as the immediate local resistance. It looks like the common currency struggles for direction after three consecutive daily advances. The pair received an extra boost yesterday along with other riskier assets after the UK and the EU arranged a Brexit deal. However, the impetus has abated since due to an opposition from the DUP and also ahead of the UK Parliament vote on Saturday. Technically, the pair needs to hold above the 1.11 handle in order to confirm a shift to a more bullish tone. However, should the Parliament vote against the deal, the euro could slip dramatically, along with the pound and other high-yielding assets on Monday.

Oil prices drifted lower earlier in the day after dismal data out of China spooked investors, in addition to bearish data from the U.S. Energy Department. The report showed a bigger-than-expected 9.3 million increase in domestic crude stockpiles last week, while exports over the past four weeks have fallen by nearly 1 million barrels. However, Brent has finally managed to shrug off the negative signals and shifted to a recovery mode from the $59.50 area. The futures climbed back to the $60 psychological handle but downside risks persist as traders may rush to take profit later in the day ahead of a parliamentary vote in the UK due tomorrow. Later today, Baker Hughes will reveal its weekly report. Should the number of oil rigs functioning in the US decline, Brent may derive some support from the release. However, the overall sentiment in the market will still depend on global developments.

Nathan Lambert, Head of Global FX Analytical Department

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Interest rates

Country Rate Value
USA Federal Funds 0,25 %
Switzerland 3 Month LIBOR Range -0.75 %
United Kingdom Repo Rate 0,10 %
EU Refinancing Tender 0,00 %
Japan Overnight Call Rate -0,10 %
New Zealand Official Cash Rate 0,25 %
Australia Cash Rate 0,25 %
Canada Overnight Rate Target 0,25 %
All rates
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