ActivTrades’ Market Analysts have prepared for LeapRate their daily commentary on traditional markets for October 15, 2019. See details below:
FOREX/BREXIT
After displaying some weakness on Monday, the pound is on the front foot during early Tuesday trading, once again approaching the highs reached last week. Investors are gaining confidence from comments made by Michel Barnier, which contradicted a previous statement from the EU’s Finnish presidency that indicated the impossibility of an agreement before the end of the week.
The EU’s chief Brexit negotiator said that, despite the difficulties in finding a compromise solution for the Irish border, it is still possible to reach a deal in time for the summit that starts on Thursday. Sterling is behaving in such a volatile way to the latest reports because the markets now see a negotiated Brexit as the best possible outcome, on a binary choice between deal and no-deal, having completely discarded the possibility of Brexit being halted and the UK remaining in the union.
UPDATED: FOREX
The Pound is up by more than 1.10% to the Dollar and the Euro, as the European Union signals unprecedented optimism on a possible Brexit deal. Pound traders started to hedge their short positions, as it appears increasingly likely that a deal between the two parts will be reached before midnight. This means the UK prime minister may have the chance to seek parliament approval for an exit deal this Saturday and avoid a new extension to the exit date. It is far from guaranteed that such deal will obtain enough support in parliament, as the Boris Johnson isn’t supported by a majority, but the prospect of a negotiated Brexit, at this stage seen by the markets as the best possible outcome, is enough to propel Sterling to almost 5-month highs.
Ricardo Evangelista – Senior Analyst, ActivTrades
OIL
Despite the risk-on scenario seen in the last few days, the oil price confirmed its weakness yesterday, being unable to hold gains achieved in the final part of last week and the main trend remains one of sideways drift. Uncertainty is still dominating the scenario, with investors seeing too many geopolitical risky elements unsolved and a high chance of an economic slowdown in the next future. This mix of detrimental elements is adding bearish pressure to oil.
The first support level is placed at $51, which is the low reached last week and also in August and June. A fall below these levels would open space for further declines. Vice-versa the first positive signal would arrive only with a recovery and climb above last week’s high of $55.
Carlo Alberto De Casa – Chief analyst, ActivTrades
EUROPEAN SHARES
European shares traded higher on Tuesday as Japanese and US traders return to their trading desks after an extended weekend. Despite rising geopolitical tensions in Turkey, a “risk-on” mood is taking hold across most share markets as investors brace for a highly anticipated Q3 earning season. In Europe, all eyes are on the UK after the EU’s Chief Brexit Negotiator Michel Barnier said a deal was still possible this week ahead of the European summit. The surprise came shortly after UK officials confirmed the nation is preparing a fresh proposal to break the Brexit deadlock before the 31st of October deadline.
The new Brexit plan is set to be submitted and discussed with EU Commission negotiators in Brussels this morning, which may increase volatility levels towards UK assets today. At this stage, we still don’t know if the UK chose to amend its position towards the dual customs scheme in Northern Ireland or if the Government has sent a totally different solution to Brussels. Investors are welcoming the optimistic tone between the two sides this morning as the chances of a deal reached before the weekend has just gone up. An immediate bullish reaction has been noticed on Sterling early in the morning following the news but the impact on the UK share market remains limited so far.
The FTSE-100 index is drifting slightly lower, a bearish move mostly due to the mechanical effect of a rising GBP currency, while an immediate support level can still be found at 7,210pts.
FTSE-100 index chart
Pierre Veyret– Technical analyst, ActivTrades