Asian stocks rallied for a third session on Tuesday as hopes for upbeat corporate earnings buoyed Wall Street, while several high-profile resignations from Britain’s government kept GBP/USD on the defensive. Investors have been on edge recently with the United States and China slapping levies on each other’s exports, spurring fears of a global growth slowdown and hurting stocks and commodities.
Prime Minister Theresa May’s foreign minister and Brexit negotiator quit on Monday in protest at her plans to keep close trade ties with the European Union after Britain leaves the bloc, stirring rebellion in her party’s ranks. Markets still think it likely the Bank of England will hike rates in August, but a full-blown political crisis could change that.
In currencies, the EUR/USD tentatively lower in early Tuesday action. The pair is on the rise, but the USD is seeing some buying in Tuesday’s early market window. The dollar had rebounded overnight from its lowest point in more than three weeks, spurred by flight from the UK pound sterling. Regarding GBP/USD, it regained some ground after several Conservative lawmakers said May is likely safe from a leadership challenge despite the resignation of Boris Johnson and Brexit minister David Davis. Still, after two years of wrangling, their departures shatter May’s own proclamation of cabinet unity last Friday in what she believed was an agreement on Britain’s biggest foreign and trading policy shift in almost half a century.
In commodities, Gold witnessed a bull flag breakout (bullish continuation pattern) and rebounded from the confluence of ascending 50-hour moving average and the upper end of bull flag. Oil gained on supply disruptions in Canada and Libya and ahead of looming sanctions on Iran. Oil will likely remain the only commodity that “truly matters” to investors and traders in coming months as the Iranian sanctions crisis keeps crude prices on the boil.
For today important economic release is GDP m/m and Manufacturing Production m/m mainly affecting GBP.