Investors Calm As Brexit Negotiations To Begin March 29th, Spot Gold Boosted By Less Hawkish Fed, ASX Futures -11

The U.K. will officially trigger Brexit negotiations on Wednesday the 29th of March a U.K. envoy to the EU President Donald Tusk overnight. Given the market has been anticipating this for months, the reaction in financial markets was muted. The Pound declined -0.28% after touching the highest levels in three weeks, U.K. two-year yields were unchanged at 0.085% and the ten-year yield declined just 1 basis point to 1.235%. The FTSE100 edged higher, up +0.07% sitting modestly below the all-time high of 7,447 while the more domestically focused FTSE250 gained +0.30% to close a new record high.

Investors don’t seem to be pricing a significant degree of risk ahead of the two-years of negotiations. The implied one month volatility for the Pound is sitting at the lowest levels since January 2016 and the one month implied volatility for the FTSE100 at the lowest levels since January 2014, implying a calmness around investors. The spread between the U.K. and German two-year yields is sitting well of recent highs and below level prior to the Brexit referendum shown on the first chart below. While this has predominantly been a result of rising German yields, overall U.K. yields do not seem to suggest any significant risk premium

Elsewhere spot gold continues to rise after bouncing of the psychological support level at US$1,200 shown on the second chart below. The precious metal initially gained following Trumps election as a hedge against inflationary policies but is now being boosted by a less hawkish Fed, which in turn increases demand for the precious metal as a hedge against inflation.

Overnight a number of Fed speakers reiterated the recent message that the Fed remained on track for three hikes this year should inflation and unemployment continue to evolve with expectations. Chicago Fed President Charles Evans noted that “three for the entire year is entirely possible” while the lone dissenter at last week’s meeting in favour of leaving rates unchanged, Minneapolis President Neel Kashkari suggested there was no rush to raise rates stating there was no threat of high inflation.

Monday was very data light providing little in the way for guiding markets, the Nasdaq100 gained modestly up +0.08% while the S&P500 edged lower by -0.20%. The U.S. dollar index was flat, up just +0.02%, and both the two & ten-year treasury yields declined -2.5 & -3.5 basis points respectively.

Locally the ASX200 index finished -0.36% lower on Monday and this morning we can expect a softer start to trade with ASX SPI200 futures down -11 points in overnight trade. If you’re interested in trading global markets and still need practice, click here to open a free $100,000 Rivkin Trader account.

Data releases:

·         Australian Weekly Consumer Confidence (Mar 19) 9:30am AEDT

·         Australian House Price Index (QoQ & YoY Q4) 11:30am AEDT

·         RBA Minutes 11:30am AEDT

·         U.K. Consumer, Retail and Producer Prices (MoM & YoY Feb) 8:30pm AEDT

Chart 1 – U.K. – German 2 Year Yields

Chart 2 – XAUUSD (Spot Gold)

Source: Rivkin, RivkinTrader

To view the Rivkin economic calendar and Local Markets matrix, members can click here.

This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via or by phoning +612 8302 3631.

Complex product warning

This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice, securities and derivatives dealing services and accounting administration services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.