Market Review - Fundamental Perspective - 18 May 2018

Asian equities rose slightly overnight on reports that China was to offer an annual $200bn trade deficit reduction package to the US, however conflicting headlines have been released this morning (Reuters). In FX, the USD Bloomberg Spot Index continued to rally as US 10y Treasury yields rose to 3.128%, the highest level in 7 years.
CAD and MXN underperformed after US Trade Representative Lighthizer claimed that NAFTA negotiators are “nowhere near close to a deal”
GBP’s initial rally on headlines (Telegraph) that the UK would be willing to stay in the customs union after Brexit was reversed yesterday when the Cabinet denied the news. While there continue to be reports around the customs union today, near-term focus is on the Irish border debate.
Our traders currently see GBPUSD support at 1.3450 and resistance at 1.3625. EURGBP is supported in the 0.8690-0.8715 area while resistance comes in at 0.8780.
Brent topped $80/b for the first time since November 2014 amid tensions in the Middle East and news from the International Energy Agency that global stock is decreasing.
Given Venezuela’s production decline and Trump’s Iran sanctions, Barclays Research revised their Brent price forecast higher to $70/ b for 2018, and $65/ b for 2019.

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