FTSE 21 points at 7388
DAX +15 points at 12005
CAC +10 points at 5010
Euro Stoxx +8 points at 3423
The UK’s Parliament gave Theresa May the permission to trigger the Brexit. The Brexit Bill is expected to receive the Royal Assent today, which means that in theory, May could trigger talks as soon as today. Nevertheless, she is expected to wait until the end of this month to kick off what is projected to be a two-year process. Scottish First Minister Sturgeon said that Scotland would hold a second independence referendum by the time there is more clarity on the Britain’s future at the heart of the continent.
On the other hand, Netherlands prepares to hold a general election tomorrow, March 15th. According to the polls, the populist PVV could emerge as one of the largest parties. The recent tensions with Turkey may have consolidated Geert Wilder’s popularity.
Similar issues are on the headlines with Marine Le Pen’s Front National party, craving for the Frexit from both the European Union and the euro. France will hold the first round of the presidential election on April 23rd. The independent candidate Emmanuel Macron received Emmanuel Valls’ support, yet Le Pen is still leading the polls with 27% chances to win the first round according to the Bloomberg poll, versus 25% for Emmanuel Macron and 20% for Francois Fillon. Le Pen’s victory in the second and the final round is not priced in for the time being.
Only time will tell how the European Union will look like by the end of 2017.
The EUR/USD failed to clear the critical 1.0707 resistance, which is the major 38.2% retracement on the post-Trump decline. Technically, the pair remains in the bearish trend into Wednesday’s Federal Reserve (Fed) verdict and Dutch elections. Sellers are expected to remain in charge for a further downside momentum toward 1.0600 (100-day moving average).
Against the pound, the single currency holds the ground above the 0.8700 mark. Yesterday’s pullback attracted dip-buyers as the Brexit remains a major concern for the pound market. The EUR/GBP cross started the day upbeat and could extend gains to challenge 0.8787 (Monday’s peak) before 0.8852 (January resistance).
The GBP/USD traded under pressure in New York and in Asia. Cheaper pound continues to benefit to the FTSE stocks. The FTSE 100 finished 0.33% higher on Monday and is poised for a firm open on Tuesday. The pound weakness could encourage a further rise past the 7400p. The mining stocks could lead the FTSE higher on the back of firmer commodity prices. Yet, traders should take necessary measures to limit reversal risks in the tense Brexit environment.
Energy stocks could remain under pressure as oil consolidates at three month lows before the weekly EIA data due on Wednesday. We remind that last week’s data was the major catalyst of the sell-off in oil markets. Another week of strong rise in U.S. oil inventories should consolidate the downtrend in WTI crude below the $49, the 200-day moving average, and pave the way for a further sell-off toward the $45 per barrel.
The U.S. dollar appetite is expected to remain firm as the Fed is expected to raise rates at the end of its two-day meeting staring from today.
The U.S. 10-year yields consolidated above 2.60%. Gold traded rangebound around the $1200 level.
The AUD (-0.12%) has been the biggest loser against the greenback. Despite 3.7% rally in iron ore prices, the AUD/USD saw little demand in Sydney. The Australian 10-year yields bounced lower from 3%, pulling the AUD/USD down to 0.7550. Carry traders are off the game; solid resistance is seen pre-0.7600. The pair should clear 0.7600 resistance to reverse losses. Otherwise, the bears could encourage a re-test of the 100-day moving average (0.7487), before 0.7450 (Fibonacci 50% level on December – February decline).
In Tokyo, the USD/JPY remained capped below the 115.00 and kept Japanese stock buyers sideways; Nikkei (-0.07%), Topix (-0.12%). The Fed has the potential to trigger a rally past 115.00/115.50 resistance zone, while a failure to hand the market to the USD bulls could encourage a temporary pullback toward the 112.00/111.50 area.
Finally, Chinese stocks saw a quiet session as the retail sales grew at an unexpectedly slow pace of 9.5% year-to-date in February versus 10.6% expected and 10.4% printed a month earlier.