Market Drivers September 20, 2019
USDJPY under 108.00 on BOJ Hold
Cable at multi-month highs
Nikkei 0.16% Dax -0.18%
UST 10Y 1.77%
Europe and Asia:
CAD Retail Sales 8:30
A quiet end of week session in FX today with no major events on the calendar and little fresh news on the political front.
Cable hit fresh multi-month highs on continued optimism regarding Brexit negotiations but the news out of Brussels was that there were no new proposals from the UK. The general sense of the market is that PM Johnson is playing for time and no serious efforts may happen until after the party conferences next week.
Next week will also bring the UK Supreme court ruling on the constitutionality of the prorogation of Parliament and should Mr. Johnson lose that case the chance of a hard Brexit spin-out will like decline. Still, at this point, the whole Brexit deal has come down to the Northern Ireland border issue and as we noted yesterday the Brexiteers realize that if they want to exit they will need to scrap sovereignty claims one way or the other.
Cable continues to perform well but the 1.2500 -1.2600 zones are proving to be more stubborn resistance with lots of overhead supply from months past and we don’t think the pair has much upside left if the political state of play remains unchanged.
Elsewhere the greenback was slightly weaker today as USDJPY dipped to a low of 107.75 in the aftermath of the BOJ decision to leave policy unchanged, As some analysts have noted, neutral is the new hawkish and the market which has been habituated to endless rounds of BOJ QE was clearly disappointed.
Despite the correction, USDJPY remains in an uptrend and only a break of 107.00 would materially change the bias lower. With no data on the docket except for CAD Retail Sales, the FX markets are likely to take their cue from equities and equities, in turn, will be watching any news on the US-China trade front. Absent and fresh geopolitical headlines the quiet tone of trade may continue into the close.