FX traders needed to remain hyper vigilant during Thursday’s trading sessions, as sterling currency pairs slumped and then rallied, as the political turmoil involving Brexit took center stage in Europe. The two leading negotiators; Davis and Barnier, appeared to be at odds once again, with Barnier, representing the remaining 27 E.U. members, voicing his profound disappointment at the lack of progress. As a consequence and with the clock ticking down to a January deadline, when the E.U. MEPs will have to take a vote on the progress and any outline agreement, GBP/USD crashed through S3 to reach a daily low of 1.3132, with most base sterling currency pairs following a similar pattern. EUR/GBP breached R2, rising just shy of R3 and a daily high just above the 90.00 handle at 0.9033.
Deep into the New York session, as news broke via the F.T., who claimed they’d seen sight of an initial draft document, suggesting that the remaining 27 countries will agree to a two year transition period to assist the U.K. divorcing from the European Union, the U.K. pound rallied versus all its peers, to recover its daily losses and make significant gains on the day. GBP/USD pushed through R2 to end the day at circa 1.3270, up 0.5% on the day. EUR/GBP fell through S2, down circa 0.6% on the day, at approx. 0.8916.
Other European news concerned the industrial production figures for the Eurozone, both the MoM figure coming in at 1.4% for August and the YoY figure coming in at 3.8%, beat the forecasts, adding to several bullish hard data results delivered by the single currency bloc over recent weeks. The outcome was the DAX reaching a record high, breaking the critical 13,000 handle for the first time in history. The U.K. FTSE 100 also reached a record high, albeit based on a negative correlation as the pound initially slumped, the FTSE futures slipped back in afterhours trading, as the pound reversed direction.
U.S. equities also initially rallied on Thursday, with the SPX and DJIA reaching new intraday record highs, although the PPI data came in mostly ahead of forecast it was termed low impact, the initial opening rallies occurred as a result of the overall investor optimism enveloping various domineering sectors. However, the rally faded, with the: SPX, DJIA and NASDAQ all selling off later in the New York session, tax cuts/reform doubts and Fed policy leaning towards interest rate rises, were cited as the critical reasons for the sudden reversal in sentiment.
As global optimism developed further contagion, bitcoin reached a new record high, after finally breaching its $5,000 level, whilst Japan’s Topix index gained 0.2% to 1,700.13, the highest level seen in over ten years. The MSCI All-Country World Index rose by 0.1% to a record. The MSCI AC Asia Pacific Index jumped 0.5%, to the highest level witnessed in ten years.
U.S. DOLLAR
The dollar index was effectively flat on the day, USD/JPY ending the day down circa 0.2% at 112.23, rejecting S1, which was sighted at 112,15, representing the lowest level versus yen, in over three weeks. USD/CHF recovered from an inflation drop, to end the day just below R1, closing the day out at approx. 0.9755. The dollar advanced versus the euro; EUR/USD fell by 0.2% to 1.1833, resting just below the daily pivot point.
STERLING
The U.K. pound experienced violent whipsaws on Thursday, relating to the breaking news being delivered on the current state of Brexit. GBP/USD recovered from its European sessions’ slump, ending the day up circa 0.5%, at 1.3270. Several GPB currency pairs developed similar patterns of behavior throughout the day, only GBP/NZD closed out the day down, despite rallying from a deep fall below S3, losing at one stage over 1.2% on the day, the currency pair still ended the day down circa 0.3%, at 1.8600.
EURO
The euro slipped versus the majority of its peers during Thursday’s trading sessions, suffering the steepest falls versus: GBP, USD and the Australasian dollars. Only versus the Swiss franc did the currency maintain its previous day’s level, ending the day marginally above the daily pivot point, at 1.1438.
EQUITY INDICES AND COMMODITIES PRICES OCTOBER 12th.
• DJIA closed down 0.14%.
• SPX closed down 0.17%.
• FTSE closed up 0.30%.
• DAX closed up 0.09%.
• CAC closed down 0.03%.
• WTI oil fell by circa 1.3% to $50.95 per barrel.
• Gold rose by circa 0.2% to $1293 per ounce.
KEY ECONOMIC CALENDAR EVENTS FOR OCTOBER 13th
• USD Consumer Price Index (YoY) (SEP).
• USD Real Avg Weekly Earnings (YoY) (SEP).
• USD Advance Retail Sales (SEP).
• USD U. of Michigan Confidence (OCT P).
• USD Business Inventories (AUG).
