- UK Brexit Minister David Davis resigns his post citing "irreconcilable differences" with PM May
- US Secretary of State Mike Pompeo dismisses North Korean accusations made in the aftermath of two days of talks in Pyongyang
- Risky assets get a shot in the arm, AUD soars, Asian indices push higher
A resignation of UK Brexit Minister David Davis was the major topic over the past several hours even as the pound barely responded to such a bombshell. Davis, being responsible for overseeing the UK’s exit from the European Union, stepped down on Sunday indicating irreconcilable differences with UK Prime Minister Theresa May in his letter to her. The document sent to May also pointed out that according to Davis it was looking "less and less likely" to fulfil the British people’s will to leave the Customs Union and the Single Market. Besides, there have been some unconfirmed reports that two junior ministers working in the Davis’ ministry may also terminate their jobs.
Bear in mind that this news came following PM Theresa May secured on Friday the backing of her cabinet for her vision of a soft Brexit. This kind of news had been by far a positive one for the British pound, but the backdrop was clouded over the weekend anew. On the other hand, the pound has yet to suffer substantially in the aftermath of the Davis resignation as he was seen as a major hurdle in seeking to deliver a soft-style Brexit by PM May. Having said that, while May may find it easier to do right now, more concessions to the EU could result in dissatisfaction among the British people, hence overall the step taken by Davis is likely to be considered as another factor undermining the May’s position.
The GBPUSD opened higher on late Sunday, and so far it has been able to hold those gains. The gap created yesterday is likely to constitute a short-terms support for bulls right now while the closest resistance is placed at 1.3450. Source: xStation5
Looking around markets one may notice that a risk-on mode has come back once again following a hideous week across Asian equities. This could be a bit surprising when we take into account the fallout of two days of talks between US Secretary of State Mike Pompeo with his Japanese and South Korean counterparts in Pyongyang. According to the North Korean foreign ministry US demands might lead to "a dangerous phase that might rattle our willingness for denuclearization that had been firm". Furthermore, the statement released within hours after the meeting described the meeting as "regrettable" and "betraying the spirit" of the latest summit between Donald Trump and Kim Jong-Un.
Nevertheless, the US had other impression following the meeting brushing aside the NK’s comments and saying that "if those requests were gangster-like, the world is a gangster," (North Korea said ’gangster-like’ referring to the US demands). Meanwhile, FX and equity investors seem to downplay these remarks, and as a result the US dollar is marching lower in the morning while the Australia dollar is gaining almost 0.5% as of 6:59 am BST. In turn, Asian indices are really soaring, and this is especially true in terms of the HAng Seng (CHNComp on xStation5) being up more or less 2%.
The Chinese stock market sees a bounce at the beginning of a new week, but beware of a dead cat bounce as the last week closed below the critical technical level. That said, the more notable support might be found nearby 9100 points. Source: xStation5
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