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By XE Market Analysis October 17, 2019 7:34 am
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    XE Market Analysis: North America - Oct 17, 2019

    The pound stormed higher on news that the UK and EU had reached a deal on Brexit before paring some of the gains amid the uncertainty about whether the deal will pass in the UK's Parliament, which will vote on it at a special session on Saturday. If it passes, then UK will be on track to exit on time, at the end of the October, though a technical delay could still be possible. The deal also sets out a transitory phase through to the end of 2020. If Parliament or (conceivably but unlikely) any of the EU17 states rejects the deal, then a delay through to at least January 31 next year will be on. Cable belted to a fresh five-month high at 1.2990 before turning lower, back to upper 1.2800s. The pair still was still up by nearly 0.5% on the day, as of the early London PM session, and remains up by nearly 7% from the major-trend low seen in early September. The pound is also up against the yen and most other currencies. The euro rallied on the Brexit deal news, which sent EUR-USD to a seven-week high at 1.1139. The pair has since settled in the lower 1.1100s, but remains up by a net 0.4% on the day. Both EUR-JPY and EUR-CHF ascended into two-and-a-half-month high terrain. EUR-GBP, in contrast, fell to five-month lows, with the pound naturally outperforming in light of the Brexit development. USD-JPY rallied to a new 11-week high at 108.94, pulled higher by sharp gains in GBP-JPY and EUR-JPY.

    [EUR, USD]
    The euro rallied on the Brexit deal news, which sent EUR-USD to a seven-week high at 1.1139. The pair has since settled in the lower 1.1100s, but remains up by a net 0.4% on the day. Both EUR-JPY and EUR-CHF ascended into two-and-a-half-month high terrain. EUR-GBP, in contrast, fell to five-month lows, with the pound naturally outperforming in light of the Brexit development.

    [USD, JPY]
    USD-JPY rallied to a new 11-week high at 108.94, pulled higher by sharp gains in GBP-JPY and EUR-JPY in the wake of news that the EU and UK have struck a Brexit deal. The news boosted European stock markets and lifted S&P 500 futures, while also weakening the Japanese currency, as per its long standing inverse correlation with global stock market movements. The new high extends the pronounced rally phase that's been unfolding since the early-October lows under 106.50. Risk appetite soared last week on the progress the U.S. and China made on trade, and has extended this week on the back of encouraging Brexit developments. Weakness in U.S. retail sales was a worry, though offset by good Q3 corporate earnings (albeit from the base of diminished expectations) while U.S. Treasury Secretary Mnuchin said that the U.S. and Chinese teams are getting the 'Phase 1' trade deal completed. President Trump also hinted at making concessions with the EU. USD-JPY has been trending upwards since the August-25 low at 104.45, which is a 35-month nadir. The prevailing up-phase marks a correction in the bear trend that has been unfolding from the October-28 high at 114.55.

    [GBP, USD]
    The pound pared gains seen in the immediate wake of the news that the UK and EU had reached a deal on Brexit. The major uncertainty now is whether the deal will pass in the UK's Parliament, which will vote on it at a special session on Saturday. If it passes, then UK will be on track to exit on time, at the end of the October, though a technical delay could still be possible. The deal also sets out a transitory phase through to the end of 2020. If Parliament or, conceivably, any of the EU17 states rejects the deal, then a delay through to at least January 31 next year will be on. Cable belted to a fresh five-month high at 1.2990 before turning lower, back to upper 1.2800s. The pair still was still up by nearly 0.5% on the day, as of the early London PM session, and remains up by nearly 7% from the major-trend low seen in early September. The pound is also up against the yen and most other currencies.

    [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 yesterday rallied back above 1.1000. The cross capped out at a 10-week high on Friday at 1.1039.

    [USD, CAD]
    USD-CAD has been ebbing lower over the last couple of days, but has so far remained above the one-month low seen last Friday at 1.3171. Increasing signs of U.S. turbulence in the U.S. economy, the latest being yesterday's retail sales miss, which is ominous in so far as it shows the slowing in manufacturing and business investment is spreading to the all-important consumer sector, has been taking a toll on the U.S. dollar. 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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