Cable Inches Towards 1.3200 as Johnson Lead Extends

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Market Drivers December 9, 2019
Cable inches towards 1.3200
Chinese exports slide
Nikkei 0.33 Dax -0.15%
UST 10Y 1.823%
Oil $58/bbl
Gold $1462/oz
BTCUSD $7492

Europe and Asia:
CNY exposrt -1.1%

North America:
No Data

FX markets were generally quiet at the start of the week with only pound showing and significant movement.

Sterling hit seven-week highs today rising to 1.3181 in late Asian session dealing after a series of polls over the weekend showed Boris Johnson extending his lead over Jeremy Corbyn. Although reliance on UK polls can always be problematic and according to Bloomberg FX traders have loaded up on protection in case of an unclear outcome that results in a hung Parliament, all signs are starting to point to a Johnson win.

Jeremy Corbyn has proven himself to be one of the worst politicians of the 21st century and his inability to generate even a modicum of excitement for Labor could result in a massive Tory sweep this Thursday. Perhaps the best thing Laborites could hope for is that a huge defeat would finally clear the decks on Labor leadership and allow for Corbyn to exit into the dustbin of history.

Cable meanwhile could see one final burst higher on the confirmation of a Johnson win but after that, the currency is likely to consolidate on a classic buy the rumor sell the news dynamic especially as Mr. Johnson will face the difficulties of the actual Brexit negotiations.

Elsewhere risk flows were muted today with equities steady after some earlier selloff at the start of trade in Asia. Generally, investor sentiment remains complacent after Friday strong US NFP reading, but one curious divergence is the weakness in USDJPY which could not hold the 109.00 figure despite good US data and remained underwater today. The inability of USDJPY to rally shows the consistent skepticism in FX to US economic growth prospects as well as concerns that the Fed may not be done easing just yet.

This week’s FOMC meeting could clarify the Fed position and provide some better directional clues for the market, but for now, traders remain wary of full USDJPY longs.

Boris Schlossberg
Managing Director

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