Kantox currency update: pound surges on Brexit deal hopes
The pound rallied across the board on Wednesday to reach four month highs against the euro, boosted by the EU Brexit chief negotiator, Michel Barnier, who assured that most of the EU divorce terms have already been agreed.
The US dollar lost ground against the euro and the yen, extending its pullback from early October highs in a risk-off session, with Wall Street suffering its sharpest sell-off in recent months.
EUR/USD: recovery extends to 1.1550. The euro advanced for the second consecutive day, with the dollar on the defensive after Wall Street’s rout, and extended its recovery from Tuesday’s lows at 1.1435 to reach levels past 1.1550. As at London market opening times, the EUR/USD is trading at 1.1545.
GBP/USD: three-week highs above 1.3200. The euro appreciated against the dollar, buoyed by the positive reports about the Brexit negotiations and returned to levels above 1.3200 to complete a 2.5% rally over the last week. As at London market opening times, the GBP/USD is trading at 1.3195.
USD/JPY plunges to 112.00. The dollar plummeted against a stronger yen in a risk-on session and loses more than 2% in the last five days, after plummeting from 114.50 highs last week, to three-week lows at 112.00. As at London market opening times, the USD/JPY is trading at 113.30.
In the Calendar Today
Today in the UK, the conferences of BoE governor Carney and MPC member Vlieghe might have some impact on pound volatility.
In the Eurozone, the release of the minutes of the ECB’s monetary policy meeting will be observed with interest. The ECB has sounded more confident on the economic outlook and, in this context, the market will be eager to know whether the bank could start hiking interest rates before planned. Any hint in that direction would be positive for the euro.
The event of the day today will be US Consumer Prices Index. US inflation is expected to have eased in August, yet still at levels way past the Fed’s 2% target of price stability. This would back Fed’s monetary normalization plan and might have a bullish impact on the dollar.
09:00 GMT BoE: Carney’s speech
10:45 GMT BoE: Vlieghe’s speech
11:30 GMT ECB: Monetary policy meeting accounts
12:30 GMT US: Consumer Prices Index (YoY) (Sept)
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