Market Drivers September 19, 2017
Cable chuncky at 1.3500
Euro tests 1.2000
Nikkei 1.95% Dax -0.14%
Oil $50/bbl
Gold $1308/oz.

Europe and Asia:
AUD RBA Notes mildly bearish
EUR Current Account 25.1B vs. 22.3B
EUR ZEW 17 vs. 12.0

North America:
USD Building Permits/Housing Start 8:30

It’s been a choppy night of trade in the FX market with little meaningful newsflow to move markets and most of the key majors trading off yen cross flows rather than any organic demand.

Yen cross demand helped to pull both cable and euro in late Asian afternoon trade with the latter popping the 1.2000 barrier before retreating while cable continued to seesaw around the 1,3500 barrier.

The 1.3500 level is the crucial support/resistance line between pre and post-Brexit trade and its not surprising that cable has found a lot of two-way action around the figure as markets try to figure out the near-term direction. Tomorrow’s UK Retail Sales will be a key data point for the pair. The UK consumer has been the one weak link in the economic growth story and if the numbers show some upside surprise the chance of a BOE rate by November will rise markedly lifting cable above the 1.3500 level for good.

Meanwhile, in Europe, both the Current Account (25B vs. 22B) and the ZEW Survey (17.0 vs. 12.0) beat their marks providing a modicum of fundamental support for the euro. The pair remains resilient in face of recent efforts at profit taking and could extend beyond the 1.2000 mark if the FOMC statement tomorrow proves to be dovish. On the other hand if the Fed remains adamant about guiding the market to a rate hike by December, the 1.2000 figure will likely prove to be the near-term top for the pair.

With no meaningful data on the docket for rest of the say, the narrow ranges could prevail for North American trade. The FOMC meeting remains the marquee event of the week, and FX markets are unlikely to move much until we get some further clarification from Ms. Yellen and company.