Cable Wobbles on Brexit Woes

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Market Drivers December 1, 2017
Cabble wobbles on Brexit woes
But UK PMI beats
Nikkei 0.49% Dax -1.08%
Oil $57/bbl
Gold $1281/oz.
Bitcoin $9950

Europe and Asia:
GBP UK PMI Manufacturing 58.2 vs. 56.5

North America:
CAD Employment 8:30
USD ISM Manufactuting 10:00

The overnight trade in Asia and Europe was dominated by oscillations in cable and not much other price action as most of the major remained within tight ranges while pound bobbled up and down with every Brexit headline.

The key stumbling block with Brexit negotiations appears to be Ireland, or more specifically the Irish border between the Republic of Ireland and Northern Ireland. The latest salvo came from PM May coalition partner – the hard right DUP party of Northern Ireland which threatened to collapse the government if Ms. May offers any sort of compromise on the Irish border.

The Irish government for it part is seeking the free flow of goods and services across the whole island of Ireland as well as a consistent EU regulatory regime and has threatened to veto any sort of Brexit agreement if it does not get those assurances from UK in writing.

As a result, some of the enthusiasm regarding a deal has dissipated and cable made a sharp about-turn in morning London trade falling through the 1.3500 figure but so far has stabilized underneath it.

On the economic front, the data out of UK was markedly better as the PMI Manufacturing came in at 58.2 vs. 56.5 but the news was quickly ignored as the Brexit negotiations continue to be the sole preoccupation of the currency market.

In North America, the US calendar is quiet save for ISM Manufacturing, but Canada will take the focus early was Statistics Canada reports the labor numbers and GDP. The market anticipates a small bump in GDP growth to 0.1% and smaller albeit positive jump in jobs to 10K. If the data misses, however, USDCAD could break long-term resistance above the 1.2900 level and push towards key 1.3000 figure as the day proceeds.

As to the dollar, all attention will be on Washington DC rather than Wall Street as Republicans struggle to keep their majority together to pass the tax bill. The debate will resume at 1100 NY and late afternoon trade could become volatile depending on the minute by minute developments. For now, USDJPY remains in the 112.00 -113.00 corridor but could see big reactions should we get some resolution before the market close for the weekend.

Boris Schlossberg
Managing Director

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