FX Update – October 14


Currencies have opened the week in undramatic fashion, with the major dollar pairings and cross rates plying range so far. Sterling has drifted lower, correcting some little after seeing the biggest two-day rally in 25 years at the tail end of last week. Opposition parties have poured cold water on the government’s Brexit plan, particularly, Northern Ireland’s DUP, not surprisingly (being unionists and given the plan to keen Northern Ireland aligned with the EU customs union post Brexit, which would insert customs border between it and the rest of the UK), and also many Labour Party members. It also remains to be seen if the EU will come round to UK PM Johnson’s plan. The EU’s chief negotiator, Barnier, said that weekend talks were “difficult,” that the Irish border remained an “untested” risk, and that negotiations may have to extend beyond Thursday’s EU’s summit. Cable has drifted to the mid 1.2500s, having breached the H1 20-period moving average earlier. Cable closed on Friday at 1.2645, having ran to resistance and the 200-day simple moving average at 1.2706. Thursday’s low was 1.2203. The Queen will today mark a new Parliamentary session, while Thursday’s EU summit will be a make-or-break point ahead of Saturday (October 19), which is the deadline for a deal to be struck before the new law delaying Brexit kicks in.

Elsewhere, there has been a flagging in euphoria about the US-China trade deal, which has not be signed off on and with thorny details yet to be hashed out. We have been here before. EURUSD has drifted to around 1.1025, down from the three-week high seen on Friday at 1.1062. USDJPY has settled around 108.20-30, down from the 10-week peak seen Friday at 108.62.

Canadian markets are closed today (Thanksgiving), Japanese markets were closed (in observance of Health-Sports Day) and it’s Columbus Day in the USA. A federal holiday – with many banks closed – but the main equity markets will open as normal, however, volumes are expected to be light with so many banks and federal offices closed.

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Stuart Cowell

Head Market Analyst

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