DUP flex their muscles
With no economic data yesterday, or today, The Pound retained gains made on its peers this week. UK Government sources indicated that significant Brexit issues were still unresolved, including the Irish backstop issue. With Northern Ireland’s DUP stating their opposition to proposals, there was more caution as the Conservative party need DUP votes for a majority. Reports then emerged that Theresa May had informed her cabinet that a historic Brexit deal was close. As the update was so unusual for her administration, a renewed wave of optimism lifted Sterling sentiment. The Pound capitalised on Dollar weakness and peaked at 1.3246, whereas it topped out at 1.1440 on the Euro before dropping back to near 1.1400 by the close.
German inflation data came in on consensus at 2.2%, meaning the Euro dollar was trading at just below the 1.16 level. Otherwise yesterday saw very little data coming out to surprise the market.
Eurozone industrial production numbers are due out to today, with any adverse numbers coming out expected to cause volatility for the Euro. Italian resistance to the EU’s budget rules is still a dark cloud hanging over the single currency, with repercussions expected to roll over into next week.
One point of interest is the Bavarian state election to be held on Sunday. The current party in power is expected to lose its majority for the second time since 1962 and many analysts feel this could add pressure to the Euro next week due to the political instability it would cause.
Data today consists of German CPI numbers, EU Industrial numbers and the ECB’s Lautenschlager speech.
The greenback, in terms of the US Dollar Index, remains on the defensive so far this week and is now looking for a leg up.
The Dollar fell yesterday following a sharp retreat in US yields and the continuation of the sell-off in the US stocks markets, which so far printed the largest drop under the Trump Administration. Yields of the US 10-year note dropped to the 3.12% late last night, where it appeared to have met some decent support.
In the meantime, the demand for the Greenback continues to suffer another bout of criticism to the Federal Reserve’s policy by President Trump.
Looking ahead, the flash reading of the US Consumer Sentiment for the current month and Export/Import Prices are due today.
24h EUR IMF Meeting
09:00 EUR Industrial Production s.a. (MoM) (Aug)
14:00 USD Michigan Consumer Sentiment Index (Oct)
17:00 USD FOMC Member Bostic speech
18:00 USD Baker Hughes US Oil Rig Count
18:00 USD Monthly Budget Statement (Sep)