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By XE Market Analysis October 15, 2019 3:30 am
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    XE Market Analysis: Europe - Oct 15, 2019

    Both the pound and the euro are up against most other currencies on an increased perception that there will be another Brexit delay, which would take the deadline out to January 31 or later. There is also increasing signs that Prime Minister Johnson has a stab at winning sufficient parliamentary support on his plan should he manage to reach a deal with the EU. But it's a tall order, as Johnson would be relying on Labour members and members he ousted from his party. On the EU side, there have been mixed messages, but its clear that a big gap remains between the two sides and insufficient time to work things through by this the Union's summit on Thursday. Amid this are reports that the EU is considering holding an emergency summit, with Brussels and key member states eager to get a deal done with that meets the twin objectives of preserving the Good Friday Agreement and the integrity of the single market. The BBC cites sources suggest that the EU is hoping Johnson concede to accepting the backstop guarantee, though if he did he would likely be punished for it at the upcoming election by losing votes to the Brexit Party. Elsewhere, the EUR-USD and USD-JPY have been holding narrow ranges. Global stock markets are back in an overall sputtering price action following a run of weak Chinese data, and with Beijing indicating that more talks will be needed on the trade front with the U.S. before last Friday's "phase 1" deal could be signed off on.

    [EUR, USD]
    EUR-USD has settled in a consolidation in the low 1.1000s after a 10-day rally phase capped out at the three-week seen last Friday at 1.1062. 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 been holding a narrow ranges so far this week after rallying quite strongly last week, which culminated in the 10-week peak that was seen last Friday at 108.62. The yen continues to be directionally linked to global stock market direction. Risk appetite soared last week on the progress the U.S. and China made on trade, but the partial deal announced has yet to be signed off on, with Beijing indicating that it wants more talks. 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]
    The pound has rallied on reports that PM Johnson will offer fresh proposals (concessions?) to the EU in ongoing negotiations for a Brexit divorce agreement. The EU's chief Brexit negotiator, Barnier, also said that a deal was still possible this week. There is also increasing signs that Prime Minister Johnson has a stab at winning sufficient parliamentary support on his plan should he manage to reach a deal with the EU. But it's a tall order, as Johnson would be relying on Labour members and members he ousted from his party. On the EU side, there have been mixed messages, but it's clear that a big gap remains between the two sides and insufficient time to work things through by this the Union's summit on Thursday. Amid this are reports that the EU is considering holding an emergency summit, with Brussels and key member states eager to get a deal done with that meets the twin objectives of preserving the Good Friday Agreement and the integrity of the single market. The BBC cites sources suggest that the EU is hoping Johnson will concede and accept the backstop guarantee, though if he did he would likely be punished for it at the upcoming election by losing votes to the Brexit Party, and it would look unlikely that this would pass in Parliament.

    [USD, CHF]
    EUR-CHF has been buffeted by Brexit headlines in a will-they-won't-they back and forth regarding the UK and EU chances of reaching a deal, and whether a delay is likely. More of the same seems likely into Thursday's EU summit and the UK's self-imposed deadline of October 19 (Saturday) to achieve a deal (if not, a newly minted law requites the government to ask the EU for an extension). EUR-CHF has today rallied back above 1.1000 after yesterday trading 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 has found a footing after dropping sharply lower in the latter part of last week. Oil prices jumped higher on Friday, supportive for the Canadian currency, but have since dropped back, which has taken the wind out of the sails of the Loonie. The head of OPEC said that the group is thinking of supply curtailment given concerns about flagging global demand. Concerns about demand were also fanned by a batch of weak data out of China this week. USD-CAD has been amid a sideways chop since mid January, ranging from 1.3016 on the downside to 1.3565 on the upside. More of the same looks likely.

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