Home > XE Currency Blog > XE Market Analysis: Europe - Oct 23, 2019

AD

XE Currency Blog

Topics6787 Posts6832
By XE Market Analysis October 23, 2019 3:42 am
    XE Market Analysis's picture
    XE Market Analysis Posts: 4711
    XE Market Analysis: Europe - Oct 23, 2019

    The pound has taken a rotation lower following the UK Parliament's rejection of PM Johnson's program bill to fast track the ratification of the EU withdrawal legislation. This means that Brexit will not happen on October 31, unless the EU decided to refuse an extension -- which is highly unlikely, as Brussels will not want to get the blame for a no-deal Brexit scenario (the pound would be crashing if markets believed that it was of a mind not to grant an extension). The EU has indicated that it is preparing some kind of flexible extension to the October 31 deadline. Johnson is now in a tough situation, as he leads a minority government, now lacking the support of Northern Ireland's DUP and the loyalty of the 20 Conservative MPs who were ejected from the parliamentary party, not to mention the one defector to the Liberal Democrats. The opposition are in a powerful position to make amendments to the bill, including making the deal subject to a confirmatory referendum. Labour, meanwhile, has said that it will back an out-of-cycle general election, which would happen either in late November or early December. The pound has corrected some more of the strong gains seen over the last couple of weeks. Cable posted a five-day low at 1.2841, extending the decline from the five-month peak seen on Tuesday at 1.3012, while GBP-JPY descended into six-day low terrain. The euro has also weakened against most currencies, outside the case against sterling. EUR-USD carved out a five-day low at 1.1116, extending a correction from the 11-week peak seen on Monday at 1.1179. EUR-JPY printed a six-day low, at 120.38, though sterling underperformance propelled EUR-GBP to a five-day high at 0.8658.

    [EUR, USD]
    The euro has weakened against most currencies, outside the case against sterling, following news of the government's defeat in the parliamentary vote on a bill to ensure that the Brexit deal ratification is fast tracked. This development will likely lead to the EU granting an extension and, mostly likely, a UK general election before Christmas. EUR-USD carved out a five-day low at 1.1116, extending a correction from the 11-week peak seen on Monday at 1.1179. EUR-JPY printed a six-day low, at 120.38, though sterling underperformance propelled EUR-GBP to a five-day high at 0.8658.

    [USD, JPY]
    USD-JPY ebbed to an eight-day low at 108.25 amid a backdrop of declining global stock markets. GBP-JPY and EUR-JPY dropped quite sharply on the news of the UK government's defeat in the parliamentary vote on a bill to ensure that the Brexit deal ratification is fast tracked. This development will likely lead to the EU granting an extension and, mostly likely, a UK general election before Christmas. There is a route to a no-deal Brexit scenario on October 31 should the EU refuse to grant an extension, though this looks highly unlikely.

    [GBP, USD]
    The pound has taken a rotation lower following the UK Parliament's rejection of PM Johnson's program bill to fast track the ratification of the EU withdrawal legislation. This means that Brexit will not happen on October 31, unless the EU decided to refuse an extension -- which is highly unlikely, as Brussels will not want to get the blame for a no-deal Brexit scenario (the pound would be crashing if markets believed that it was of a mind not to grant an extension). The EU has indicated that it is preparing some kind of flexible extension to the October 31 deadline. Johnson is now in a tough situation, as he leads a minority government, now lacking the support of Northern Ireland's DUP and the loyalty of the 20 Conservative MPs who were ejected from the parliamentary party, not to mention the one defector to the Liberal Democrats. The opposition are in a powerful position to make amendments to the bill, including making the deal subject to a confirmatory referendum. Labour, meanwhile, has said that it will back an out-of-cycle general election, which would happen either in late November or early December. The pound has corrected some more of the strong gains seen over the last couple of weeks. Cable posted a five-day low at 1.2841, extending the decline from the five-month peak seen on Tuesday at 1.3012, while GBP-JPY descended into six-day low terrain.

    [USD, CHF]
    EUR-CHF has been lifted recently by the Brexit deal, which has been supportive of the euro, though the latest developments have dented the common currency. The cross last week printed a two-and-a-half-month high at 1.1059 before settling near 1.1000.

    [USD, CAD]
    USD-CAD has found its feet after printing a three-month low at 1.3071 yesterday (during Asian hours). The pair is now consolidations at levels that are about 1% down on week-ago levels. The pair is also showing just over a 4% decline on the year-to-date. This follows what is now a three consecutive weeks of underperformance. A recovery in global risk appetite (much reduced no-deal Brexit risk, cancellation of planned U.S. December tariff hikes on Chinese goods) has helped underpin the Canadian dollar, along with other commodity-correlating currencies.

    Paste link in email or IM