Half a week flies past in the wonderful world of FX

Most of this week has been spent at half-mast. Loooong periods of inactivity have been shocked into life for fleeting moments and by the time you’ve tried to find what’s going on, it had all died down again. The yanks taking half a week for one day’s holiday is a bit of piss take but hey ho, it’s up to us to make our own fun.

We had a big bout of stock wobbles early in the week and oil had another spill. That drove money into USD once again as it became the safety currency of choice. That in turn saw Treasury yields falling towards the 3% mark. EURUSD and GBP suffered late on Tuesday. There might have been a fair bit of squaring before the pumpkins started getting pounded and the Turkey’s started wondering why the lights went out, because from Wednesday, the volatility bus got parked up.

Never fear, Brexit’s near and Deja vu struck as headlines hit that there was yet another draft agreement for us to digest. This one was on “future ties”, although many are saying it’s future handcuffs still. It mattered not a jot though initially as GBPUSD rose like a salmon from the depts of the 1.27’s to a lofty peak of 1.2926. When all the details were chewed thoroughly, the current negative nancies, like the May rebels and opposition parties still had nothing good to say about it. I swear if the Brexit deal came with free £50 notes for all with it, some would still find a reason to moan. The reality of what it really takes to get a deal like this even remotely favourable is lost to many and most in this country. But I digress, back into tight, low liquidity ranges we wen and the pound lost further ground from around 1.2880 to finish up a whisker away from 1.2800.

The EU gave us a big reminder why the UK voted to leave as after the draft text came out so did some historic chips on shoulders. The French started moaning about fishing, and the Spanish started moaning about Gibraltar. With billions in trade and revenues at risk from Brexit on both sides, a lump of rock and a few sardines are suddenly the make or break of the deal. France has gone from actively engaging in taking jobs from London’s financial services to now kicking up a stink over where they can fish. Well mes amies, what’s the EU Brexit party line? “You can’t have your cake and eat it”. Maybe Theresa May should send a sarcastic tweet to that extent with a picture of Donald Tusk eating his breakfast kippers. And, yes, I do have a long memory for slights like that 😉

The EU should also worry about getting its own house in order too because the economic data isn’t exactly doing it any favours. It’s not been good lately and the PMI’s today should no improvement is likely in November. That’s bringing rising worries about the ECB’s course of action. No one is worrying about QE ending next month but they are worrying about the proposed rate hikes next year. Still, the ECB are all still calling it temporary but the data is testing the market’s patience. EUR suffered on the PMI’s today and is looking to finish the week at the lowest levels since last Friday, after touching the heady highs of 1.1470. This is going to be a continued theme ahead of the December ECB.

The Fed is also finding itself increasingly under the microscope but not (like the ECB) for when hikes will start in 2019 but when they will stop. Some soggy consumer numbers and some worsening housing data has the market writing down 2019 expectations. Both these central bank themes are going to run and run and the economic data is going to gain much more traction in price moves.

Oil was in the thick of things too again this week. Brent had lost over $9 this week to today, while WTI lost over $7, and that’s all still happening with OPEC talking further production cuts. This is another situation where politics is talking and more underhand dealing is happening between the US, the Saudi’s and others.

A quiet week on the trading front for me. Some trades didn’t quite hit my levels or when they did, became untradeable due to the news driving them. That can be frustrating at times but that’s when the discipline comes to the fore and remembering that even the best laid plans don’t mean a guaranteed win but that there’s always another bite of the cherry just around the corner.

The roomies did very well with some well-timed group trades on CAD. That’s the benefit of a strong trading community. Sir Dubs had it away with a bundle of trades, all called live, and the Kmeister was harvesting the pips thick and fast. My thanks to them and the room folks for another great week, and to all the readers for giving us your eyeballs.

Have a great weekend.

Ryan Littlestone

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