Sterling surged to 5-month highs as a Brexit deal was announced.
US data was mixed, and the dollar retreated to 7-week lows as European and commodity currencies regained ground while markets continued to price-in a further Fed rate cut.
Sterling surged to 5-month highs as a Brexit deal was announced before sliding on major doubts whether the deal would be approved in parliament.
EUR/USD still moved to 7-week highs above 1.1100 as Brexit hopes provided support. Global equity markets were mixed with underlying global growth and trade uncertainty limiting support as Brexit-related gains faded.
Oil prices were protected by a weaker dollar, but gains were limited after a strong inventory build. Precious metals were protected by a weak dollar, but demand was limited.
Initial jobless claims increased to 214,000 in the latest week from 210,000 previously. Housing starts data was below consensus forecasts with a sharp decline to 1.26mn from a revised 1.39mn, although building permits were stronger than expected at 1.39mn. Industrial production data was weaker than expected with a 0.4% September decline.
The data overall failed to provide significant dollar support with commodity currencies continuing to make headway and EUR/USD settled around 1.1125. There was little change on Friday with markets continuing to monitor political developments closely. Fed rhetoric will also be potentially important with the blackout period coming into effect on Saturday.
UK retail sales were unchanged for September, in line with consensus forecasts to give an annual increase of 3.1% from 2.6% previously and the data provided marginal Sterling support.
The UK currency pushed sharply higher ahead of the New York open as the EU and UK announced that a new Brexit deal had been agreed. There was an immediate GBP/USD surge to fresh 5-month highs near 1.3000 amid a soft dollar while GBP/EUR rallied towards 1.1650 for the first time since May.
Gains, however, reversed quickly after the Northern Ireland DUP party stated that they would not back the deal. There were, therefore, important concerns that the revised deal would not be approved in Saturday’s parliamentary vote. The deal was approved within the European Council while there was very mixed domestic rhetoric and major uncertainty over potential parliamentary developments.
After sliding to near 1.2750, GBP/USD recovered to around 1.2850 while GBP/EUR settled close to 1.1500. Bank of England’s Ramsden stated that rate increases would be back on the table if there was a smooth Brexit.
Very choppy trading will continue Friday, especially with position adjustment ahead of crucial weekend events. Sterling would be likely to open sharply lower on Monday if the deal is rejected with gains on approval.
|11:00||EU Leaders Summit||-||-|
|15:00||FOMC Member George Speaks||-||-|
|15:00||FOMC Robert Kaplan Speech||-||-|
|15:30||FOMC Member Kashkari Speaks||-||-|
|16:30||FOMC Member Richard Harris Clarida Speech||-||-|
|18:00||USD Baker Hughes US Oil Count||-||712|
|18:45||BoE Gov Carney Speaks||-||-|