Irish border obstructs Brexit progression

Irish border roadblock drags GBP and boosts FTSE
US markets boosted by tax reform expectations
UK construction output rises at five-month high

Joshua Mahony MSTA Scope Markets

Hopes of an early-morning Brexit breakthrough have been dashed, with discussions over an Irish border resolution seemingly no closer to a resolution. With Theresa May heading to Brussels, there was clearly a high degree of expectations that we would see a breakthrough today. However, with the UK wishing to move onto the trade negotiation phase without giving any certainty on the Irish border issue, it is clear that the Irish government has no such plan to allow easy passage over this issue. With the pound tumbling in response to this morning’s Irish Brexit roadblock, we are seeing the FTSE 100 gain ground, responding to the pound devaluation rather than the negative economic consequences of further delays to trade negotiations.

US markets are expected to lead the way once more today, with the weekend Senate vote clearing out yet another hurdle amid a massive push towards a pre-Christmas agreement. Friday’s focus on Michael Flynn largely overshadowed the progress being seen on the tax reform side, with the dollar and stocks suffering amid fears that Flynn could provide incriminating evidence against the Trump administration. Instead, we are seeing the markets focus back onto the tax reforms issue, with Republican Senator David Perdue indicating that the bill could be on Trump’s desk within 10-days.

The UK construction sector has sprung back into life, with the latest PMI data seeing output rise at the fastest rate in five-months. Interestingly, the benefits of this recent construction rebound appear to be confined to the residential sector, with commercial building and civil engineering continuing to decline. Coming off the back of Friday’s manufacturing PMI outperformance, there is a growing feeling that the services sector could similarly outperform tomorrow. However, with markets instead choosing to focus on the inability of to find a resolution to the Irish border issue, it seems investors are looking elsewhere for now.

Ahead of the open we expect the Dow Jones to open 189 points higher, at 24,421.

Author

Joshua Mahony MSTA

Scope Markets

Joshua Mahony is Chief Markets Analyst at Scope Markets. Joshua has a particular focus on macro-economics and technical analysis, built up over his 11 years of experience as a market analyst across three brokers.

GBP/USD turns negative; slips back to 1.3530

GBP/USD comes under pressure and weakens toward the 1.3530 zone on Tuesday. Cable thus leaves behind two daily upticks in a row and retreats further from Monday’s multi-week tops past 1.3570 following humble gains in the Greenback and disheartening UK jobs data.

EUR/USD comes under pressure near 1.1570

EUR/USD could not sustain the earlier bullish attempt toward the proximity of 1.1600 the figure, coming under fresh downside pressure and revisiting the 1.1580-1.1570 band as the NA session draws to a close on Tuesday. The better tone in the US Dollar in the latter part of the day weighs on the pair amid steady volatility in the Middle East. Looking forward, the release of the FOMC Minutes takes centre stage on Wednesday.

Gold remains offered around $4,350

Gold accelerates its daily correction and revisits the $4,350 zone per troy ounce on Tuesday. The precious metal sets aside two daily advances in a row and follows the absence of direction in the US Dollar, declining US Treasury yields across the curve and continuous uncertainty in the Middle East crisis.

HYPE extends gains as Hyperliquid urges SEC action on pre-IPO futures framework

Hyperliquid (HYPE) retains a broad bullish outlook, trading above $59.00 on Tuesday. The decentralized exchange (DEX) native token marks the second consecutive day of gains as bulls return, eyeing a short-term breakout above $60.00.

Fiscal concerns and doubts on Fed independence send US yields to long-term highs

US Treasury yields keep rising across the curve this week, with the yield for the 30-year Treasury bond reaching its highest level since 2007, during the global financial crisis, at 5.33% so far on Monday. A mix of concerns about the ballooning US fiscal deficit and growing doubts about the Federal Reserve’s Independence are increasing pressure on US Government Bonds.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.