The UK looks set for a general election on 12th December after Jeremy Corbyn relented and the House of Commons passed the motion late in the day. Sterling held onto modest gains at the end of the day, and depending on the outcome of tonight’s Fed Rate decision, could support a re-test of the 1.3000 mark on the Dollar. The House of Lords will need to pass the motion before it obtains Royal Assent on Thursday. The assumption is that the Commons will formally dissolve on Wednesday 6th November and the uncertainty driven by political polls will return.
The price action around the Dollar keeps looking to developments on the Brexit front, which has a direct impact on the sentiment. In addition, some fresh concerns have re-emerged on the US-China trade context after news cited the recently clinched ‘Phase One’ deal could not be ready to sign next month in Chile.
Moving forward, market participants largely anticipate another 25 bps ‘insurance’ cut at today’s Federal Open Market Committee event, although the focus of attention will likely stay on the Federal Reserve’s forward guidance for the next months and the press conference by Chief Powell.
The Euro’s correction from recent highs around the 1.1180 against the Dollar has likely ended but the level could come back into play should German inflation data beat estimates and the Fed deliver a dovish rate cut.
The preliminary German Consumer Price Index (CPI) for October is expected to remain unchanged at 0% month on month. A weaker than expected data reading would validate the European Central Bank’s latest stimulus and thus pushing the Euro lower. The pair may also take cues from the German jobs data also due for release this morning.
Data to watch
10.00 EUR – German Unemployment Change
12.30 USD – Advance GDP
13.00 EUR – CPI
19.00 USD – Federal Funds Rate
19.30 USD – FOMC Press Conference