EU-UK: Foreign Sec To Address Conservative MPs On Brexit Deal Tuesday
Wires reporting that UK Foreign Secretary James Cleverly will address the 1922 Committee of backbench Conservative MPs on Tuesday 21 February regarding what is believed to be a deal reached/about to be reached between the EU and UK on the Northern Ireland protocol. The tenor of the address - whether about the details of a deal, or more broadly encouraging Conservative MPs to get on side with the gov't - will determine whether the address is seen as a positive sign or one of division in the ranks.
- The gov'ts working majority stands at 70 seats, meaning 35 Conservatives could break ranks and vote against a deal and it would still pass (a tied vote would usually go in the gov'ts favour). The hard-line eurosceptic European Reform Group is believed to have around 30 committed members at present, who would likely side with the DUP and oppose a deal involving the ECJ in any capacity. As such, if just this group opposes an updated protocol, the gov't likely has the votes to pass it.
- However, there has been speculation that allies of former PM Boris Johnson could also oppose a reworked protocol. While this number is more fluid, the Boris-ite cohort combined with the ERG would almost certainly have enough votes to defeat a reworked NI protocol.
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JGB TECHS: (H3) Extends Bounce Off Lows
- RES 3: 151.13 - High Mar 3
- RES 2: 149.75/150.81 - High Nov 11 / High Aug 5
- RES 1: 147.64/148.79 Low Dec 6 / High Nov 16
- PRICE: 146.96 @ 15:48 GMT Jan 20
- SUP 1: 144.15 - Low Jan 13
- SUP 2: 144.02 - 2.0% Lower Bollinger Band
- SUP 3: 143.88 - 1.0% 10-dma envelope
JGBs bounced sharply Wednesday and extended gains into the weekly close on the back of the unchanged BoJ rate decision. The rally puts prices well above recent lows, although the overarching downtrend remains intact for now. First resistance sits at 147.64 as well as 148.79, the Nov 16 high. Vol band support remains below at 144.02 and 143.88 below.
USDCAD TECHS: Pierces The 50-Day EMA
- RES 4: 1.3751 High Nov 4
- RES 3: 1.3705 Dec 16 and the bull trigger
- RES 2: 1.3665 High Jan 6
- RES 1: 1.3521 High Jan 19
- PRICE: 1.3411 @ 16:28 GMT Jan 20
- SUP 1: 1.3322 Low Jan 13
- SUP 2: 1.3317 Low Nov 24 / 25
- SUP 3: 1.3226 Low Nov 15 and bear trigger
- SUP 4: 1.3205 61.8% retracement of the Aug 11 - Oct 13 rally
USDCAD pulled away from recent highs, but largely respected the recent range Friday. Nonetheless, this week’s move higher has resulted in a print above 1.3500, the 50-day EMA. A clear breach of this area of resistance would signal potential for a stronger recovery near-term and open 1.3665, the Jan 6 high. Key resistance is at 1.3705, the Dec 16 high. Key short-term support has been defined at 1.3322, the Jan 13 low. A break would resume recent bearish activity.
US TSYS: Risk Buoyed Ahead Fed Blackout
Tsys weaker across the board but off midday lows after the bell, 30YY +.0943 at 3.6555% vs. 3.6646% high, yield curves bear steepening (2s10s +4.530 at -69.177. Decent volumes (TYH3 >1.2M) on a relatively subdued session w/ the Federal Reserve heading into policy blackout at midnight (through Feb 2).
- Sole data point underscored move: Existing home sales fell by less than expected in December, -1.5% M/M (cons -3.4%) after -7.9% M/M, faring better than the latest slide in pending home sales. It left an 18% decline on the year for the sharpest annual decline since 2008.
- While Bonds dragging short end rates lower, market expectation for 25bp hike at next FOMC on Feb 1 stable: Fed funds implied hike for Feb'23 25.8bp, Mar'23 cumulative steady 45.1bp to 4.783%, May'23 steady at 55.6bp to 4.888%, terminal dips slightly to 4.890% in Jun'23.
- No concerted headline driver, Bond weakness more tied to concerted commentary from various central bank officials (not just Fed) on improved global outlook in past couple weeks lending to intermediate-long end pressure on those growth prospects.
- Risk buoyed by dovish comments from Fed Gov Waller, favoring another downshift at the next meeting ending February 1 to a 25bp rate hike but anticipates continued tightening going forward.
