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Check out the brand new DailyFX trading forecasts for Q3

MARKET DEVELOPMENTS – GBP Slumps as PM May Faces Defeat on Key Brexit Vote, Kiwi Soars on CPI

US equity futures trading in the red with the Nasdaq 100 the notable underperformer, down 0.9%. This was largely due to the double-digit plummet in Netflix (-12.5%) shares after their earnings update in after hours yesterday. European bourses are also broadly in the red with the exception of the FTSE 100, which has found support amid the fall in the Pound.

GBP: Another robust labour report, which saw the UK employment rate at a fresh record high while the average weekly earnings had a favourable revision provided a lift to the Pound. However, this was later reversed on reports from UK press that the May could face defeat on tonight’s key Brexit vote (1800GMT) after the Labour party confirmed it would back an amendment proposed by Conservative rebels that would force the UK to join the customs union with the EU if no trade agreement were reached by 21st January 2019. A defeat for PM May tonight could fuel speculation that a leadership challenge may be on the way.

NZD:The Kiwi is flying high this morning after yesterday’s inflation report. The CPI on a quarterly and yearly basis had fell short of expectations, leading to an initial blip lower. However, given the extreme short NZD positioning, the reaction was limited and thus losses had been pared immediately, prompting a short squeeze in the currency. Additionally, the RBNZ later released their preferred measure of inflation, which rose by 1.7%, marking its fastest pace in 7yrs, consequently exacerbating the gains in NZDUSD.

DailyFX Economic Calendar: Tuesday, July 17, 2018 – North American Releases

GBP Falls as May Faces Brexit Vote Defeat, NZD Soars on CPI - US Market Open

DailyWebinar Calendar: Tuesday, July 17, 2018

GBP Falls as May Faces Brexit Vote Defeat, NZD Soars on CPI - US Market Open

IG Client Sentiment: NZDUSD Chart of the Day

GBP Falls as May Faces Brexit Vote Defeat, NZD Soars on CPI - US Market Open

NZDUSD: Data shows 64.2% of traders are net-long with the ratio of traders long to short at 1.79 to 1. In fact, traders have remained net-long since Apr 22 when NZDUSD traded near 0.73681; price has moved 8.0% lower since then. The number of traders net-long is 7.9% higher than yesterday and 1.8% higher from last week, while the number of traders net-short is 5.0% higher than yesterday and 9.6% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZDUSD prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed NZDUSD trading bias.

Five Things Traders are Reading

  1. DXY Index Halts Losses Ahead of Powell Testimonyby Christopher Vecchio, CFA, Sr. Currency Strategist
  2. Dow Jones: Bullish Trend Pulls Back From Fibonacci Resistance” by James Stanley, Currency Strategist
  3. Trader Sentiment: Crude Oil Price, USD and GBP in Focusby Martin Essex, MSTA, Analyst and Editor
  4. EURUSD Rebound to Falter on Upbeat Fed Chair Powell Testimonyby Justin McQueen, Market Analyst
  5. Crude Oil Price: Downward Pressure Persists on US and Brent Contracts” by Martin Essex, MSTA, Analyst and Editor

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX