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European open – Brexit, ECB, RBS, gold, oil

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UK awaits EU extension decision

Brexit limbo continues on Thursday as the UK awaits judgement from Brussels on its extension request, one week before the country is due to leave the European Union. The EU will be in no rush to make a decision and may even be awaiting more details on how Parliament intends to make use of the time before doing so. There’s little chance of it rejecting the request but how long it offers needs to be determined.

The pound has rallied a little this morning on the back of claims that Labour has offered a “pragmatic path” to a Brexit deal with a compromise on the timetable. The details of this are still lacking and the terms will probably not be acceptable to the Prime Minister but in reality, it’s not that important. An extension will be signed off, at which point we’re probably heading for an election. We are starting to see the light at the end of the tunnel.

Source – Thomson Reuters Eikon

Homage to Draghi

The ECB meeting today will be more a homage to Mario than a market event. A candle on a euro shaped cake will likely be the highlight of Draghi’s final meeting as President, with the central bank having unleashed Mario’s final bazooka a couple of months ago. The slowdown in Europe remains a major concern but that will be Lagarde’s problem, assuming the measures announced previously are as ineffective as many fear.

PPI takes one final swing at RBS

RBS is not out of the woods yet as the bank dipped back into lossmaking territory in the last quarter. While a surge in last minute PPI claims may have partly contributed to the loss, other factors including global growth and other legacy issues weighed on the bank’s bottom line. This was never going to be a smooth return to profitability and today’s 3% decline is a reminder that there will be bumps along the way.

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Gold resilient on softer dollar

Gold is reminding us that lulls in the market don’t always come in the summer as it continues to consolidate in the $1,480-1,500 range. Gold looked to have entered into correction territory late last month but it has quickly run out of momentum. A 2% decline in the dollar has likely contributed to the new-found resilience in the yellow metal. If that continues, we could see gold gather some upward momentum.

Gold Daily Chart

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Oil pares gains as inventories decline

Oil prices are paring Wednesday’s gains which took them to fresh highs for the month. The move was aided by a surprise inventory drawdown from EIA, but Brent quickly ran into resistance around $61. Oil may now be off its lows but gains are very gradual and downward pressures, most notably as a result of the subdued global outlook, persist.

Brent Daily Chart

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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Craig Erlam

Craig Erlam

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary.

His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News.

Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
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