News & Analysis

Weekly Summary – Brexit and the Federal Reserve

March 22, 2019

By Deepta Bolaky
 @DeeptaGOMarkets

It was a packed week with a slew of economic releases, central bank meetings and Brexit. The Federal Reserve and Brexit were the highlights of the week.

Brexit

Investors were gearing up for a third vote this week. However, the Speaker John Bercow blocked the Prime Minister to vote on the deal for a third time unless it had fundamentally changed. We saw headlines that Donald Tusk, the European Council President is putting a key condition on the Brexit extension. The President mentioned in a press conference that he believes that a short delay will be possible, but it will be conditional on a positive vote on the withdrawal agreement in the House of Commons.

The choices from Brexit had narrowed leaving traders on edge. The condition means that the MPs can either pass the Prime Minister deal or leave the EU without a deal. On Thursday, the deadline investors were dreading was postponed as the EU leaders finally offer an unconditional two weeks extension to the UK.

The British Pound found little direction throughout the week and fell towards the end of the week.

Equity markets

In the equity markets, the Federal Reserve was in the spotlight. Investors were expecting the Fed to lower its interest rate expectations but reducing its hike forecasts from 2 to 0 came as a big surprise for the markets. After a few conflicting trade headlines at the start of the week which have put some pressure on risk sentiment, the equity markets found support on a dovish Fed.

  • The S&P500 ended on a 5-month high on Thursday following a broad-based performance in the technology sector.


Source: Bloomberg Terminal

  • Asia stocks were also pretty much in the positive territory towards the end of the week.
  • In the local share market, trading was volatile, and price action swing from gains and losses at the start of the week. However, the index is poised to end the week in the green if late recovery on Thursday is kept throughout the trading session on Friday.

World Equity Indices (% Chart)


Source: Bloomberg Terminal

FX Markets

In the currency markets, the Fed also dominated the price action sending the US dollar to the downside. Major currencies were mostly higher against the Dollar. The index tracking the performance of the dollar against a basket of currencies recovered the losses made the post-FOMC meeting but remain in the red for the week.

On the economic front, it was a packed week with a slew of economic data releases:

  • In Australia, RBA speeches and its minutes did little to move the Australian dollar. However, Jobs reports supported the local currency, and the unemployment rate fell to 7-year low.
  • In the UK, we saw top-tier data this week. Employment and inflation data were promising but failed to give Pound traders a clear direction amid the current Brexit uncertainties.

 Commodities Markets

In the commodities market, oil prices popped higher on bullish oil reports whereby there was a larger than expected draw in crude oil inventories.

UKOUSD and USOOSD (Hourly Chart)


 Source: GO MT4

Gold reached a high of $1,320 during the week before retreating to $1,308 towards the end of the week following the recovery of the US dollar.

XAUUSD (Hourly Chart)

 
Source: GO MT4

 

Monday, 25 March 2019
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0.786 0 0 0.042 0.075 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 3.262 0 0

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