GBP/USD Drops on Brexit Latest, Crude Oil Prices Surge - US Market Open
USD: Modest gains for the greenback, which has largely been underpinned from the drop in the Pound. However, moves have been range-bound at best for the US Dollar, having maintained a foothold above the 98.00 handle.
GBP: The Pound is on the backfoot, briefly dipping below the 1.22 handle on the back of reports that UK PM Johnson will ask the Queen to suspend parliament next month (Sep 9th – Oct 14th) in order to prepare new legislation in the Queen’s speech (Oct 14th). While such a move is a normal procedure, the fact that parliament will be suspended this will reduce the time for opposition parties to put forward a motion to prevent a no-deal Brexit. Consequently, Sterling sold off across the board, benefiting the FTSE 100, which outperforms the domestically focused FTSE 250.
EUR: With little on the economic calendar, once again focus turns towards Italy in which both the 5 Star and PD party are looking to form a new coalition government. As both sides appear to have resolved the current stumbling blocks, namely allowed for Conte to be the PM, an announcement is expected later today. In reaction, to the increased optimism of a more business friendly government, Italian bond yields reached a new milestone as the 10yr broke below 1%, while spreads vs. the Bund, tightened to 170bps.
Oil: The oil market is on the front foot this morning, having been given a boost in yesterday’s session, which in turn saw Brent crude futures reclaim the $60/bbl mark. The factor behind the lift in oil prices had stemmed from the latest API crude oil inventory report, which showed a large drawdown in crude stocks of 11.1mln barrels vs. Exp. 2.1mln barrel drop. Consequently, eyes will be on the DoE crude inventory report for confirmation of yesterday’s figure, if matched, this would mark the largest drop in crude stocks since June 21st.
WHAT’S DRIVING MARKETS TODAY
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--- Written by Justin McQueen, Market Analyst
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