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More confusion about Brexit, Aussie jumps post inflation data


  • Tuesday did not bring us even a touch closer to get a Brexit agreement

  • Aussie jumps on the back of the inflation data and a spike in iron ore prices

  • Apple earnings came in slightly above expectations pushing the stock somewhat higher in after-hours trading

No progress at all

Even as expectations before a string of votes on Tuesday in the House of Commons were placed rather low, the yesterday’s outcome could be a bit disappointing failing to bring us even a touch closer to get a final deal. Several amendments to a May’s Brexit agreement were voted but two of them drew particular attention. The first one, a possibly the most important too, concerning a possibility to rule out the prospect of the UK crashing out of the European Union without a deal was rejected. The sterling also got a blow after members of the Parliament rejected the so-called Cooper-Boles amendment proposing to dealy UK’s exit from the block. Finally the Brady’s proposal seeking legally binding changes to the so-called backstop arrangement for the Irish border was backed. Theresa May also backed up this plan wanting to present this idea to Brussels showing that it would allow the Brexit deal to be approved. Having said that, European Council President Donald Tusk said the EU-UK divorce deal was not up for renegotiation in spite of the fact that the UK’s Parliament voted to replace the Irish backstop with unspecified “alternative arrangements”. He added via his spokesman that “The Withdrawal Agreement is and remains the best and only way to ensure an orderly withdrawal of the United Kingdom from the European Union,” French President also sided with Tusk as his office’s statement said that the EU-UK Brexit deal was not up for renegotiation. It added that it was vital that the UK clarified its intentions and made credible proposals. The sterling declined following the yesterday’s votes but it regained a bit of its lost momentum during Asian hours trading.

Technically the GBPUSD might still try to push higher with 1.33 being the first notable resistance. On the other hand, the 75DMA could be considered as the important support for buyers. Source: xStation5

Aussie leads the gains

The Australian dollar is undoubtedly the best performing currency this morning being up against the US dollar almost 0.6%. Two factors helped the Aussie climb so much. The first one was the inflation report for the last quarter of 2018 producing somewhat higher than anticipated numbers. Headline CPI fell to 1.8% YoY from 1.9% in the third quarter but it topped expectations suggesting a 1.7% YoY rise. In quarterly terms we got a 0.5% rise after a 0.4% increase in the previous quarter, the consensus also had pointed to a 0.4% pick-up. Core prices stayed unchanged though with the trimmed mean holding onto 1.8% and the weighted mean sticking to 1.7%. However, the latter was revised up to 1.8% from 1.7% for the third quarter. The Aussie got also a boost from iron ore prices surging more than 9% in the aftermath of the news that Brazil’s Vale SA, the world’s largest producer, plans to cut output due to a deadly dam breach. The company suggested that it could slash its output by 40 million tons a year. Earlier it had planned to mine 400 million tons this year. In response to this announcement Goldman Sachs decided to raise its forecast. The bank now expects iron ore prices to reach $70 per tone in six months to come and to $80 in the three-month horizon. Both forecasts were revised up by $10 per tone.

While the outlook for Aussie does not seem to be rosy, the AUD could be subject to some rises if the US dollar begins stumbling. Looking at the weekly time frame one may notice that there is fairly ample room for gains from the current levels. The first hurdle for bulls might be localized at 0.7235. Source: xStation5

In the other news:

  • NASDAQ (US100) finished Tuesday’s trading 0.8% lower, the worst performing index there, the SP500 (US500) fell 0.15% and the Dow Jones (US30) rising 0.2%

  • Apple reported earnings for its fiscal first quarter, it shows EPS at $4.18 ($4.17 expected), revenue at $84.3 billion ($83.87); the company projects Q2 revenue to be between $55 billion and $59 billion ($58.83); the stock rose 6% in extended trading

  • Japan’s retail sales for December increased 1.3% YoY and 0.9% MoM beating the median estimates; the consumer confidence gauge slid in January to 41.9 from 42.7

Chart of the day - EURGBP (18.05.2022)
Economic calendar: Inflation from Canada, US housing market data
Morning wrap (18.05.2022)
Daily summary: Global stocks jump amid weaker dollar
Dollar with the longest series of declines since March 17, 2022