Risk-off sentiment extended into Asia this Tuesday, in light of the overnight positive Brexit developments and further US-China trade talks. The British pound rallied further and tested the 1.3290 levels following reports that the UK PM May managed to clinch some Brexit assurances on the Irish backstop from the European Commission President Juncker. However, the knee-jerk spike soon faded and the rates dropped back to the 1.32 handle, as the bulls remain wary ahead of the parliamentary vote on May’s Brexit deal. Meanwhile, the EUR/USD pair managed to hold onto gains near 1.1250 levels, as the greenback traded on the back foot across its main peers amid reports of fresh talks on the US-China trade matter.
Among the Asia-pac currencies, the Yen traded on the offers amid dovish BOJ comments, weak fundamentals and risk-on action in the Asian equities, leaving the USD/JPY pair well bid above the 200-DMA near 111.30 levels. Meanwhile, the Aussie traded modestly flat, capped by the 0.7080 level, in response to downbeat NAB Australian business survey. The Kiwi, on the other hand, advanced to daily tops near 0.6850, having benefitted from firmer stocks and oil prices. Gold futures on Comex headed back to test the 1300 psychological level despite higher Treasury yields and risk-on.
Main Topics in Asia
Trump proposes a record $4.75 trillion budget - The New York Times
GBP/USD tops out at 1.3285 on optimistic views on backstop amendments
EU Juncker, UK PM May Brexit meeting in Strasbourg said to be over
Aussie data dump: Feb NAB business confidence/conditions survey + Home Loans send AUD lower
OPEC's Barkindo: Oil market relebalancing is work in progress
BOJ's Amamiya: BOJ has tools to ease further
WTI: Supply cut concerns please buyers with $57, sellers await API, EIA data
China’s Vice Premier Liu, US Trade Rep. Lighthizer had further discussions on trade, Aussie bounces
Irish TransportMin Ross: Irish PM to make Brexit statement early on Tuesday
China NBS Chief Ning: China’s January - February consumption overall stable
Gold Technical Analysis: Flag breakout favors move above $1,300
Key Focus Ahead
Tuesday’s EUR calendar remains an eventful one, with the UK manufacturing production and monthly GDP rate to headline alongside the trade and industrial figures at 0930 GMT. Ahead of the UK data dump, we have the speech by the RBA Assistant Governor Debelle due at 0630 GMT. The ECB Governing Council member Lautenschlaeger is scheduled to speak at 1045 GMT.
In the NA session, there are plenty of event risks, including the US Feb CPI report (due at 1230 GMT) and the Parliamentary meaningful vote on the UK PM May’s Brexit deal due later in the American afternoon around 1900 GMT. In the meantime, the speech by the FOMC member Brainard will draw some attention, as the US CPI figures could back up the Fed pause. Also, of note remains the US API crude stockpiles data that will drop in at 2130 GMT.
EUR/USD: 10-year US-German yield spread hits 3-month high ahead of US CPI
EUR/USD's recovery from recent lows below 1.12 could be short-lived, as the yield differential is widening in the EUR-negative manner. The spread between the 10-year US and German (DE) government bond yields is currently seen at 259.2 basis points - the highest level since Dec. 18.
GBP/USD: Bulls await Brexit vote, US inflation to take out 1.3300
A slew of details/events from the UK and the US could help bulls to foresee chances of 1.3300 break. Early-day news reports were positive for the GBP, as headlines showed that PM May managed to get legal assurances from the EU on the on Irish backstop.
GBP - Trade or Fade the Brexit Vote?
Nothing is more important this week that the Brexit votes on Tuesday, Wednesday and possibly also Thursday. There's no exact time for the vote but it will be after the debates, which usually end evening time in the UK.
US CPI Preview: Backing up the pause
The Bureau of Labor Statistics will issue its February consumer price index on Tuesday, March 12th at 8:30 am EDT, 12:30 GMT. Overall consumer prices are expected to be 0.2% higher in February up from flat in January.
BOJ to lower its production and export assessment this week – Goldman Sachs
The Goldman Sachs analysts offer a detailed preview of what to expect from the Bank of Japan (BOJ) monetary policy review meeting that concludes on March 15th.
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