Politics seems to be the primary driver of market tensions at the moment and the US is never far away from any of it. President Trump continues to vocally attack China, Canada and the EU, stating “unfair trade agreements” and for now markets are still showing concerns about how this could progress further. Over the weekend Trump hit up his favoured medium; Twitter, stating that a successful call with Saudi Arabia to increase oil production would result in cheaper fuel prices for all, so at least there’s some things good happening although how much we can believe of that remains to be seen. Despite the air of concerns in markets, major US indices finished the month higher with only the Dow trading lower through July. Markets however still feel on edge and as we enter thinning summer trading, moves could well be exaggerated. Thus far the first trading session of July has been weak, the Nikkei is down over 2%, the Nifty down almost 1% and the S&P ASX is the best performer down just .27%. European market have all opened weaker as well, the CAC down over 1% already, the DAX -.79% so things are certainly feeling more down beat.
It’s not just the US that our political focus is on, Germany is facing crisis talks later today and tomorrow as the CSU and CDU meet to try and hold a fragile coalition together. Once again its border controls and migration concerns that’s causing the friction and Merkel has already pointed out that a failure for the two parties to find some middle ground will be to the detriment of third parties. Closer to home and Brexit talks are heating up, but not in a good way. The UK government has claimed to come up with a third solution to a customs union, this remains to be seen but will be discussed later in the week in parliament.
We have to note the slide in recent weeks towards a no deal Brexit and while it may just be headline fodder, the considerable rise in headlines recently suggesting that businesses, banks and other financial businesses are preparing for a hard Brexit has the pound feeling the pinch.
Looking at major levels and EURUSD continues to find support at 1.1530 area, 1.1690, 1.1718 and 1.1800/20 area major levels of resistance higher, I wouldn’t expect to see a break outside of that range today.
EURGBP broke above .8830 area on Friday and as we highlighted it shot straight up towards .8900 area (actual high was .8893). .8830 now offering support to a move lower.
GBPUSD still struggling regain any foothold, 1.3000 area remain key, a break below there and sterling could well find itself in freefall. Any rally higher should fall short of 1.3500 this week.