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By XE Market Analysis October 14, 2019 3:59 am
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    XE Market Analysis: Europe - Oct 14, 2019

    Currencies have opened the week in undramatic fashion, with the major dollar pairings and cross rates plying range ranges 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, 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, which is about a big figure down on Friday's closing levels. 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 17), 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 U.S.-China trade deal, which has not be signed off on and with thorny details yet to be hashed out. EUR-USD has drifted to around 1.1025, down from the three-week high seen on Friday at 1.1062. USD-JPY has settled around 108.20-30, down from the 10-week peak seen Friday at 108.62.

    [EUR, USD]
    EUR-USD has drifted to around 1.1025, down from the three-week high seen on Friday at 1.1062. A reality check on Brexit (EU reporting concerns about Irish border proposal) has weighed on the pairing. Bigger picture, EUR-USD has been in a clear bear trend since early 2018, descending from levels above 1.2500 over this time period. The 28-month low seen on October 1, at 1.0879, marked a reaffirmation of this trend.

    [USD, JPY]
    USD-JPY has settled around 108.20-30, down from the 10-week peak seen Friday at 108.62. The yen continues to be directionally linked to global stock market direction. Last week the currency underperformed markedly as risk appetite soared on the progress the U.S. and China made on trade, and has firmed back a little as some of the euphoria diminished over the weekend. The partial deal announced on Friday has yet to be signed off on, with various potentially contentious points of detail yet to be hashed out. USD-JPY has been trending upwards since the August-25 low at 104.45, which is a 35-month nadir. This marks a correction in the bear trend that has been unfolding from the October-28 high at 114.55.

    [GBP, USD]
    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, 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, which is about a big figure down on Friday's closing levels. 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 17), which is the deadline for a deal to be struck before the new law delaying Brexit kicks in.

    [USD, CHF]
    EUR-CHF has turned lower as last week's optimism about the EU and UK making progress on Brexit has cooled. Northern Ireland's DUP, not surprisingly said it was against the plan, 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. Many Labour Party members are reportedly against the deal. The EU's chief negotiator, Barnier, also 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. EUR-CHF traded below Friday's low in making 1.0971. The cross capped out at a 10-week high on Friday at 1.1039.

    [USD, CAD]
    USD-CAD turned quite sharply lower in the latter part of last week Oil prices jumped higher on Friday, supportive for the Canadian currency. The head of OPEC said that the group is thinking of supply curtailment given concerns about flagging global demand. The geopolitical situation in the Mideast also remains fragile. The U.S. is making a full military withdrawal from Syria, and an explosion on a Iranian oil taker was, according to Tehran, caused by a missile strike.

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