The British Pound extended gains slightly today after UK Prime Minister Theresa May survived a vote of no confidence by a narrow margin. May needs to focus now on finding a solution for the on-going Brexit drama, with a second referendum not being completely ruled out.
The uncertainty around the Brexit is as high as never before, so it might appear odd why the Pound is rising. However, the outcome of the votes helps to minimize the risk of a hard Brexit.
While traders should be prepared for a sudden surge in GBP volatility, many market participants prefer to stay on the side-lines until there is more clarity. Cable could therefore see a period of consolidation between 1.27 and 1.30.
Other major currencies continued to trade in a tight range – with the US Dollar in demand, and the Japanese Yen under pressure amid an improvement in risk appetite.
The S&P 500 and DAX both ended the trading day with a modest gain. Stock markets caught a bid following China´s tax cut announcement, but this alone will not be enough to keep the momentum up. Market participants are still waiting for an update regarding the trade talks between the US and China.
The Session Ahead:
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support