Cable Stumbles on Brexit Grumbles

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Market Drivers May 22, 2017
Cable stumbles on Brexit grumble
EUR below 1.1200
Nikkei 0.45% Dax -0.26%
Oil $51/bbl
Gold $1255/oz.

Europe and Asia:
No data

North America:
No data

It was a data free start to the start of week’s trade today as FX markets remained quiet in Asian and early European dealing. With little newsflow to move the markets, the major pairs remained in narrow ranges but saw a bit of profit-taking after massive gains last week.

The EURUSD slipped below the 1.1200 mark dropping to a low of 1.1160 before finally finding some buyers. The pair gained more than 2 figures the week prior and today’s price action was an understandable bit of profit taking from the longs.

With President Trump away for another week on his first major foreign trip, the drumbeat of negative stories from Washington DC may slow down a bit providing a reprieve for the dollar, but the mood in the market is unlikely to turn on a dime and the rally in EURUSD should continue.

Tomorrow the market will get a look at EZ Flash PMIs which will be the most recent measures of economic activity on the ground and should they prove positive the euro could extend to fresh pearly highs on the news.

Meanwhile, cable was mildly weaker after news over the weekend that UK will walk away from Brexit talks if it is forced to pay massive exit bill of as much as $100 Billion. The French Finance Minister La Maire decided to pour salt on a wound by stating that Brexit will represent an opportunity for financial markets. The two sides are clearly preparing for tough negotiations which begin formally June 19h. Cable has seen a very strong rally in anticipation of a large Tory win in the UK elections, but PM May’s lead has declined considerably and if she does not win an overwhelming majority her position at the bargaining table may be weakened. Cable faces considerable technical resistance at the 1.3000 level and if it can’t clear it with conviction the pair may fall back to 1.2800 over the near term horizon.

With no data on the docket today, the North American trade may be slow as well, but with dollar still in the sell mode, the greenback could see further weakness as the day proceeds.

Boris Schlossberg
Managing Director

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