Italian official: Italy has no plan to block possible Brexit extension

Bloomberg reports

That's trying to put to bed rumours over the weekend that Italy was planning to vote down a possible Brexit extension, if it does come about over the next few days. At least it's a positive headline for the pound on the day, though I doubt it will do much to inject calmness into markets at the moment.

We're still waiting on the conclusion of talks between the DUP and the government, before a decision is made over whether or not May will be calling for a third meaningful vote on her Brexit deal tomorrow or on Wednesday.



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Germany says cannot rule out threat of Italy or another country thwarting Brexit delay

Comments by Germany's chancellery chief

Brexit

Says that the issue of a Brexit delay is not an uncontroversial issue among EU member states and that it cannot be ruled out that Italy or any of the member states voting to stop a delay. That doesn't sound too positive and more headlines like this will surely weigh on the pound if May isn't able to bring forward or win a third meaningful vote.



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EUR/USD rises to two-week high as dollar holds weaker on the day

EUR/USD touches a session high of 1.1350

EUR/USD H1 18-03

Buyers remain in near-term control and are starting to make an attempt for a further upside break now as the high for the day touches 1.1350. On Friday, large expiries helped to contain the pair between 1.1300-25 but with no key notable ones rolling off today we're seeing the price range start to extend.

Of note, there is the 100-day moving average @ 1.1367 so that will be a key resistance level to watch out for in the day. Further offers lie at the 1.1400 handle so I would expect that to help keep gains in-check as well.

The dollar is holding a little weaker as equities continue to stay buoyed with risk sentiment still optimistic as we begin the European morning. The aussie and kiwi are still leading gains while the yen joins the dollar at the bottom of the pile for the time being.



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Equities extend gains ahead of North American trading

European stocks are roaring as we look to close out the week

  • Eurostoxx +1.4%

  • Germany DAX +1.1%

  • France CAC 40 +1.3%

  • UK FTSE +0.6%

At the same time, we're also seeing a nudge higher in US equity futures with S&P 500 futures now up by 0.4%. Of note, tech stocks are broadly outperforming with Broadcom's earnings beat cited as one of the main reasons for that.

E-minis 15-03

That being said, not all risk signals are pointing to a more positive tone with oil flat on the day and the same goes for Treasury yields.

Let's see what Wall Street has to offer later today and if these gains can be sustained as we head into the weekend.



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Japan says will continue to support US-North Korea talks

Japanese chief Cabinet secretary, Yoshihide Suga, comments

  • Says will continue to back nuclear disarmament talks between US and North Korea

  • Wants to cooperate closely with the related countries

  • Hopes to reach a resolution on abduction, nuclear and missile problems

It's not exactly their call at this point. Let's see if North Korea will announce anything official in the coming days.

KimMore talks? Nope, not gonna happen on my watch.



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AUD/USD shows some resilience but yields spread divergence still an issue in the long-run

AUD/USD is lifted on the day by China's reiteration to bolster its economy

AUD/USD H1 15-03

However, buyers are finding it tough to move above resistance around 0.7095-00 so far this week. Despite re-establishing a more bullish near-term bias, the pair continues to struggle to find an upside break as yields continue to prove to be a bane for the aussie.

The 0.7000 handle remains a key psychological level for the pair but should the RBA start moving further towards siding with rate cuts and the Fed possibly raising rates in 2H 2019, expect that to be more of an issue for AUD/USD buyers; just like it was when the Fed aggressively hiked rates last year:

AUD/USD vs yieldsThe AUD/USD trend has been a yields story since 2H 2017

The aussie previously pulled back from testing the 0.7000 handle in late December/early January as short positions grew to stretched levels where they tend to reverse, based on CFTC data that is:

AUD CFTCCFTC data threshold seems to indicate that short positions tend to reverse once they move past the 60k contracts level

However, currently net short positions are at ~41k contracts as of 5 March, so that could indicate some room to maneuver towards the downside to test the 0.7000 handle for sellers should fundamentals work in their favour.

That said, I wouldn't be too comfortable seeing short positions sitting around current levels too as they are more or less close to being over-stretched in any case. I would chase a solid break under the 0.7000 handle if it does come about eventually, but until then it's hard to catch a downside move towards 0.7000 when buyers are also looking just as poised to defend the level currently.



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Brexit: DUP source said that 'tweaks won't cut it' in talks with government

According to a BBC reporter

The pound dips on this with cable falling from 1.3220 levels to a low of 1.3208 before coming back up now to 1.3220. Looking at price action in the pound now, I must say that it has a sense of a lack of liquidity given the kind of gyrations we're seeing over the past few hours.

After jumping up to 1.3330 earlier, it has been a quick trip back towards 1.3220 now which is basically a depiction of the mess we've been seeing in the daily chart this week as well.



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Dollar holds firm as US, China said to push back meeting between Trump

The greenback remains steady as risk assets decline

EUR/USD H1 14-03

Of note, EUR/USD touched a low of 1.1305 while AUD/USD and NZD/USD are also trading at session lows respectively of around 0.7050 and 0.6816. The dollar was already holding firm on the day against the major currencies bloc but the news of a postponement to the Trump-Xi meeting just pushed the greenback a little higher.

This comes as equities pare earlier gains as seen by US equity futures here:

E-minis 14-03

The dollar's gains are also helped by the fact that the Chinese yuan has dipped to a one-week low, falling by 0.5% against the greenback currently.



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Germany's economy ministry says GDP likely increased moderately in Q1

Comments from Germany's economy ministry

Germany

  • German economy had a subdued start to 2019

  • That points to higher risks and uncertainties abroad

  • Domestic demand remains solid, fiscal impetus provides support for the economy

  • Weak phase in industrial sector likely to continue

  • Mainly stems from weak demand from abroad

Factory activity remains a real cause of concern for Germany and that won't be helped if the US does slap the region with auto tariffs in the coming months. For now, the services sector remains one of the few bright spots but it remains to be seen how long it can shoulder the weight of the German economy on its own.



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EU's Barnier: It is up to the UK to find a way out of the impasse

Comments by EU chief Brexit negotiator, Michel Barnier

  • UK is solely responsible for Brexit decision

  • UK parliament vote worsens Brexit matters

  • The vote prolongs and deepens great uncertainty

  • Questions whether or not the UK still wants to leave the EU

  • Current agreement remains the only one available for an orderly Brexit

Barnier certainly doesn't sound like someone who wants to offer a helping hand. But his comments here aren't anything we don't already know of. The real question now will be how complicated will it be to extend Article 50?

All EU27 members will have a different idea on how long and what conditions the extension should encompass, so it'll be interesting to see if they can reach a unanimous decision on those matters in the coming two weeks.



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