Familiar scenes (of defeat) for Brexit
Two significant votes were undertaken in UK Parliament early this morning and needed simple majorities to pass. The first of those was regarding the Withdrawal Agreement Bill, effectively a vote in support of PM Johnson’s Brexit deal. This passed with more support than expected accumulating 329 to 299. The second and equally as important (given there’s only 9 days left till the Oct-31 deadline) was in relation to the government’s proposed timetable for passing the bill through the requisite legislative channels. This was shot down with votes in favour falling short 308 to 322. It appears increasingly unlikely now that PM Johnson pushes through a deal prior to Oct-31. Therefore, a Brexit extension from the EU will be required.
Risk sentiment lower at Asia open
A tumble in late NY on the back of Brexit’s latest defeat is primed to carry over to Asia open. USDJPY has been surprisingly quiet through the anticipated headlines though notably it has been more reactive to US/China headlines, which have been sedate as of late. Long positioning in risk-on/risk-off USDJPY remains strong with intra-week support and resistance at 108.3 and 108.7 respectively. NZDUSD appears to move lower in a bid to re-test 0.64 having broken above the level earlier in the week. Positioning is a touch off neutral to the upside for Kiwi similar to AUD. ASX Cash is set to open marginally lower with ASX Futures down overnight by 2pts. Quarterly reports for Iluka Resources (ILU.AX) and Newcrest Mining (NCM.AX) are also due out today.
RBA Assistant Gov. Kent speaks
Aussie traders catch a panel participation at 9.20am AEDT early this morning from RBA Assistant Governor Christopher Kent at an ISDA event. We don’t expect dialogue from Kent to significantly impact Antipodean price action with broader developments in US/China talks and Brexit more pressing for market participants. Though, locals will still be listening in for any monetary policy clues on whether the RBA wavers from an expected hold in November, which we saw aggressively priced in at 78% probability following last week’s solid Aussie jobs report. AUDUSD has fallen away from the neckline of a double bottom formation but slight long positioning still remains in tact.
Canadian resilience
A few data points of note arrived last night and while not necessarily impressing, have continued to reaffirm long positioning in CAD space. Canadian Core Retail Sales disappointed coming in soft at -0.2% vs 0.0% consensus; while Retail Sales (non-core) also declined -0.1% against 0.4% consensus. The positive however on the print was an upwards revision to July sale numbers. USDCAD rallied +23pips to test 1.3123 but has since pulled back -40pips upon the release of the BoC Business Outlook Survey.
The BoS indicator is up on the prior quarter consistent with a slight improvement in overall business sentiment albeit still remains below the peak of 2017/18. Indicators of future sales suggest moderate sales growth ahead. In spite of the earlier weak sales data, it’s unlikely to alter the path for the Bank of Canada in the foreseeable future. However, since the BoC has noted that it will be watching soft consumption data, there could be risks to the downside going out into the close of the year. For the time being, USDCAD short positioning remains strong with markets pricing in a rate hold for the BoC’s October meeting to the tune of 98% probability.
