This week has all been about GBP again, as the Brexit fears were cranked up a notch after last weekend‘s interview with PM May. Putting a timeframe on triggering Article 50 to get negotiations under way clearly put the jitters in GBP markets. After some tentative signs that GBP may have set a base, this was swiftly overturned with post Brexit highs taken out midweek, but then dealt a bigger blow by what is largely assumed to have been an algo driven order, which saw Cable gapping through 1.2500 and 1.2000 to record lows in the mid 1.1800’s.
EUR/GBP took out key resistance levels in the mid .8800’s to ramp up into the high .9200’s, before both pairs stabilised and later returned to more reasonable levels. It is hard to see GBP recovering to any notable degree with so much time ahead of us – as long as March 2017, but we have certainly stabilised since, with the first support point in the more liquid London and NY centres putting a 1.2200 base in place. .9100 is the equivalent level in EUR/GBP.
The pound ‘flash crash’ took some of the attention away from the main data event of the week, where US payrolls came in below the consensus 175k expectations at 156k, and after some hesitation, we saw the bid tone in the USD ease up, though no major pull back was noted, as the numbers are good enough to key December live for the much awaited Fed Funds rate hike – if it comes.
EUR/USD managed to hold support into 1.1100, while USD/CHF continues to hold off the mid .9800’s in conjunction with this. The USD/JPY rally looks to have come to an end for now, with early September highs containing. The rally from the low 100.00’s was all based on higher yields, but with these wavering in light of the latest US jobs report, and move back into a comfortable range inside 101.00-103.00 now looks likely.
In the commodity currencies, the CAD is still coming under pressure despite the buoyant oil prices, but Friday also saw the employment data coming in much better than expected, as did the Ivey PMIs, but we continue to hold close to 1.3300, above which lie some notable stops which many anticipate could propel the pair to (or even through) 1.3500.
AUD/USD has found support below .7600, but has been largely side-lined alongside NZD, with AUD/NZD tight on 1.0600 over the latter part of the week. Into next week, we have the BoE meeting midweek to keep GBP in the limelight, with German inflation data and the ZEW survey and EU Sentix sentiment. US retail sales is the main data read stateside, but we expect the USD to lose some of its stronger tone of late, with the presidential elections expected to ‘hit’ at some stage.