The U.K. pound came under pressure on Monday morning, as the two week E.U. deadline ultimatum issued on Friday, immediately effected trader sentiment when Asian markets opened, and the sell off continued until late afternoon. Theresa May’s authority came under pressure as ministers briefed against her over the weekend and more Brexit complication also emerged on Monday. As European markets opened sterling continued its fall versus the majority of its peers, GPB/USD falling through S2, losing up to 0.7% at one stage. All the gains cable has made, since the BoE sounded a hawkish narrative in October, followed by a base rate rise in November, have now been erased. GBP/USD once again fell through the 100 DMA.
Sterling did recover some earlier losses late afternoon as the U.K. government made an announcement declaring that the U.K. parliament would have the final say on the Brexit deal, but couldn’t overturn the referendum decision, or revoke the delivery of article 50, deciding the UK’s withdrawal from the E.U. In other U.K. fundamental news, a leading house price index from online sellers Rightmove reported that asking house prices fell by -0.8% in their latest survey, an unusual occurrence as the majority of Brits, particularly based in the south east of England, appear to think they need to think up a number and someone will pay the asking price.
The U.S. dollar rose versus several of its main peers on Monday, not necessarily as a consequence of its peers’ weakness, more in relation to dollar strength, which may begin to build as the FOMC December meeting (the outcome of which is predicted to be a rate rise), begins to come into sharp focus. As “earnings season” is close to ending, any USA equity market rises are now presumably linked to a final favourable decision on the Trump administration’s tax proposals, it’s surely too early to raise the subject of a “Santa rally”. USA equities closed the day up; DJIA up circa 0.07% and the SPX up 0.10%. The only key USA fundamental news release published on Monday related to the monthly budget statement, which missed the forecast of -$59b, coming in at -$63.2b for October, however, it requires a long memory to recall a time when worsening USA debt figures actually (negatively) moved the equity markets.
European equity markets closed sharply down on Monday, there was precious little in the way of fundamental news to cause the selloff, other than a report from the IMF which concluded that the remaining E.U. 27 members will also suffer economic damage, when the U.K. finally Brexits. However, this obvious information alone shouldn’t have provided a compelling reason for a significant sell off, perhaps the lingering Catalonia issues also combined to dent investor confidence. The euro did make significant gains versus its main peers; up circa 0.5% versus sterling and showing similar gains versus both Australasian and the Canadian dollars.
STERLING
GBP/USD fell through S2 mid-morning in the London session, to then recover in correlation to various announcements from the U.K. government, convincing investors that they’re not overseeing complete chaos. The currency pair ended the day down circa 0.4% at 1.311, just below S1 and once gain breaching the 100 DMA, an area which the currency pair has gravitated towards since the beginning of November. Versus AUD, CAD and NZD sterling ended the day flat, versus CHF and JPY sterling closed the day out down circa 0.3%.
U.S.DOLLAR
USD/JPY whipsawed through a wide bullish and bearish range on Monday, initially rising through R1, to then fall through S1, finally ending the trading sessions up 0.2% at 113.5. USD/CHF also whipsawed, through a mainly bullish tight range; rising through R1 early in the European session, then falling back through the daily pivot point, to then rise to R1, to then recede to close out the day up circa 0.2% at 0.996, with the critical handle of 1.000 proving difficult to maintain. USD/CAD rose significantly on the day by circa 1.2%, crashing up through R3, ending the day at circa 1.273. This daily rise comes at the end of USD falling significantly v CAD since November 1st. The Canadian dollar also fell versus several of its major peers on Monday.
EURO
EUR/USD ended the day up circa 0.2% at 1.116. EUR/GBP rose by approx. 0.7% at one stage in the European session, before giving up some gains to close out up circa 0.5%, at 0.889. Versus AUD, NZD and CAD the euro rose by circa 0.6% reaching R2. EUR/JPY whipsawed through a bearish and bullish range on Monday, falling through S1 close to the London/European open, to then reverse direction, breaking up through the daily pivot point to end the day up circa 0.2%, at 132.5.
GOLD
Gold advanced by circa 0.2% on the day to $1276 per ounce. The precious metal’s price rested on the daily pivot point as markets closed on Monday evening. Gold fell significantly on Friday, and price continues to move throughout a relatively tight range, located close to the 100 DMA.
EQUITIES SNAPSHOT FOR NOVEMBER 13th
• DJIA closed up 0.07%.
• SPX closed up 0.10%.
• Euro STOXX closed down 0.54%.
• FTSE 100 closed down 0.24%.
• DAX closed down 0.40%.
• CAC closed down 0.73%.
KEY ECONOMIC CALENDAR EVENTS FOR NOVEMBER 14th
• EUR German Gross Domestic Product w.d.a. (YoY) (3Q P).
• EUR Italian Gross Domestic Product w.d.a. (YoY) (3Q P).
• GBP Consumer Price Index (MoM) (OCT).
• EUR Euro-Zone ZEW Survey (Economic Sentiment) (NOV).
• EUR Euro-Zone Gross Domestic Product s.a. (YoY) (3Q P).
• JPY Gross Domestic Product (annualised) s.a. (QoQ) (3Q P).
