Market News & Insights
6 December 2017

Headlines Driving Major FX

The feeling in the markets is they are moving solely around the continued political headlines we are seeing across the various hot points. In the UK, GBP has been facing whip saw action around Brexit related headlines where not much more than a week ago the agreement on a settlement figure appeared to shine hope on negotiations and sent the pound soaring. Headlines on Monday then suggested a solution to the Irish boarder situation was another step in the right direction but this has all come crashing down and now Theresa May could well be fighting for her leadership with Brexit talks well and truly back on the ropes.

In the US the ebb and flow of news from the tax bill and probes into Russian interference in to the election all have the ability to derail the buoyant optimism that appears to keep US markets afloat. A slight shift in this news flow can start stocks sliding and the USD likewise. For what it’s worth sentiment in the US has soured this week with the S&P on a three day losing streak and other US indices pulled lower as well primarily led by a slide in tech stocks. . That hasn’t bothered the greenback however, with traders still looking towards a US rate hike in a couple of weeks while the rest of the market is looking forward into 2018 and trying to get some grasp on what Powell might do as the Fed chair, the USD index sits around the midpoint of its November range For now Europe appears happy to sit in the middle, European stocks move on broader sentiment while the Euro, eternally backstopped by the promise of ECB bond purchases in a never ending period of easing, just sits in no man’s land. Data from the region is steadily improving and its certainly hoped thatch worst is behind but the ECB still is not willing to remove the mass amount of stimulus that contributes.

Taking a look at the data and we’re light across the European session some retail PMI prints across the region but nothing too much to get excited about. ECB board member Mersch speaks in Frankfurt later today and will likely be the most euro traders can hope for some action, but given the ECB party line of late that’s very much unlikely to change the Euro outlook too much. Later in the afternoon we’ll be looking stateside to the US ADP report, scheduled to 190k jobs added to the labour markets in the US, and is usually a preliminary to Fridays NFP scheduled to show 197k. Looking at major currencies and we don’t see to much shift from recent trends and ranges.

EURUSUD is more or less holding between 1.1800 and 1.1950 for the last two weeks. We have already seen a small attempt below 1.18000 yesterday that didn’t last long and even any break from there will be limited to support above the 1.1720 area.

GBPUSD’s big breakout above 1..3300 had enough legs to take it all the way to 1.3550 but recent Brexit uncertainties and a firmer USD have helped press GBPUSD back below 1.3400 for now and 1.3330 becomes a target for support once more.

EURGBP is just in the larger range from .8730 to .9000. The old adage buy low and sell high appears to be how most market players are participating in this range based pair for now.