Volatility expected in FTSE and GBP this week

Markets await key vote in Parliament

The UK is awaiting a key vote on Theresa May’s Brexit deal on Tuesday night, after which the government will be navigating uncharted territory. Described as arguably the most important parliamentary vote in a generation, possibly since 1940, it is currently considered highly likely the vote will be lost by the government.

Volatility expected in FTSE and GBP this week

There is some speculation that the prime minister may postpone the vote, or if she loses, return to the negotiating table with the EU to seek a more palatable deal for MPs. Traders are expecting a highly volatile week in the markets this week, although the FTSE has opened down only 0.41% in early trading. Sterling is currently trading close to 1.275 dollars as traders stay glued to developments in Westminster. From a technical perspective, the trend for the pound is looking quite negative, but anything could happen this week of all weeks. Overall, there is an impression in the markets that they are ready to react significantly on news.

Traders of GBP/EUR will need to be aware of possible short term bearish reactions in the EUR market following more riots in Paris over the weekend and bearish comments from France’s finance minister Bruno Le Maire in the wake of these.

Asian markets lose ground as Huawei arrest hits indexes

The big theme in Asian markets this morning remained the trade tensions between the US and China. Investors are under no illusions that the future of Pacific trade is still under threat, despite a temporary agreement at the G20 summit in Buenos Aires. The arrest of Huawei CFO Meng Wenzhou in Canada, pending extradition to the US, is expected to be the latest chapter in US-China tensions. China has begun agitating for her release, applying pressure on the Canadians.

Huawei is the biggest manufacturer of mobile phone equipment in the world, but is beginning to face bans on its technology for government use by countries like the US and Australia. The Meng arrest has the scope to become a much bigger issue than it really is, if nationalist sentiment on both sides of this incident is energised. There are also more intrinsic worries among economists that there is a slow down in credit growth in China with further implications for its economy. Hong Kong closed down 1.2% while China’s CSI index also shed 1.2%.

Oil market down as OPEC sits on its hands

The oil market is moving through interesting waters as well, with OPEC seemingly no longer the strong indicator of oil price sentiment it once was, despite agreeing a modest cut of 1.2m barrels on Friday. With two major non-OPEC countries, Russia and the US, seemingly calling the tune with oil markets, there is also the fact that Russia and Saudi Arabia are obviously discussing output independently, and Saudi is the only OPEC country with the weight to really influence global oil prices. Qatar has also just said it will be leaving the alliance, and although it is a relatively small producer, the departure reflects tensions within the group of countries over what it is meant to be achieving. Brent crude opened the week up marginally at $61.91.