Weekend headlines were dominated by ‘no-deal’ preparations.
Risk appetite improved during Friday with markets expecting further global monetary stimulus and a more positive tone was sustained on Monday.
Equities rallied while there was a small recovery in bond yields amid pre-weekend position adjustment and yields edged higher on Monday.
The dollar secured net gains with the Euro again undermined by expectations of aggressive ECB easing in September, although speculation over German fiscal easing limited losses.
The yen and Swiss franc were resilient amid underlying US-China trade fears. Sterling continued to gain support from short covering amid expectations that parliament would step-up efforts to avoid a disorderly EU exit.
Underlying Middle East tensions and firmer risk conditions helped underpin oil prices. Demand for precious metals declined slightly as equity markets rallied.
The Euro remained under pressure ahead of Friday’s New York open with the currency unable to take advantage of an increase in German bond yields.
Political developments remained important on Friday with further manoeuvrings by MPs opposed to the possibility of any ‘no-deal’ exit from the EU on October 31st. In relative terms, the solid data releases for the week provided net support. Overall yield spreads widened slightly further with the gap between UK and German yields at 2-month highs. GBP/EUR continued to correct higher towards 1.1000 while GBP/USD advanced to highs near 1.2175 before fading slightly.
CFTC data recorded a small decline in net short, non-commercial positions, but the total remained close to 100,000 contracts and there is still scope for substantial liquidation and short covering if there is a sustained shift in sentiment.
Weekend headlines were dominated by ‘no-deal’ preparations and markets will be watching Prime Minister Johnson’s planned meetings with German Chancellor Merkel and French President Macron this week with Sterling firm in early Europe as GBP/USD traded above 1.2150.
|10:00||Euro-Zone Core CPI (Y/Y)(JUL 01)||1.10%||0.90%|
|10:00||Euro-Zone CPI (Y/Y)(JUL)||1.20%||1.10%|
|10:00||Euro-Zone CPI (M/M)(JUL)||0.10%||0.20%|