Pound Perks Up; Dollar Bulls Awaits US Data

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Market Drivers November 28, 2018
Pound recovers a bit ahead of Brexit analysis
FX Steady
Nikkei 1.02% Dax 0.06%
Oil $51/bbl
Gold $1213/oz.
Bitcoin $4120

Europe and Asia:
EUR Money Supply 3.9% vs. 3.5%

North America:
USD GDP 8:30
USD Core PCE 8:30
USD New Home Sales 8:30

It’s been a quiet and steady night in FX with little newsflow or price action as currency markets awaited the release of Brexit analysis to Parliament and US GDP data late in the day.

PM May government is scheduled to release its analysis of Brexit deal to the Parliament but the government canceled oral statements today as Ms. May tries to shore up support for the deal among the Tory faithful. There appears to be some success in convincing some of the MPs that this is the best deal that UK will be able to obtain under the current conditions and some of the more rebellious Tory members may be having second thoughts at scuttling the deal and triggering a possible hard Brexit.

In the meantime, the ECJ has promised to deliver its opinion on revocation of Article 50 by December 4th a full week ahead of the December 10th Parliamentary vote on the Brexit deal. Although the opinion is non-binding it will be a signal to how the court views the issue and could open the way for a 2nd UK referendum if the end result would allow UK to remain in the EU without any further legal maneuvers.

The market remains convinced that some sort of a compromise deal will be struck, although the sentiment of the bulls continues to waver and the 1.2700 level in GBPUSD remains the key support line in this trade. For now, cable continues to inch towards 1.2800 and if it can break above the figure it would be a strong sign that some sort of short-term bottom is in.

Meanwhile, in the US the focus will be on GDP figures with consensus expecting no revision from the first print of 3.5%. More importantly, the market will look at the PCE data which is the Fed’s preferred measure of inflation. If the number which is expected to print at 1.8% surprises to the upside, it is sure to reaffirm Fed’s hawkish stance on inflation, despite Trump’s vigorous attempts to get monetary policymakers to halt hikes. USDJPY continues to hold bid at 113.75 and any hot reading on PCE could push the pair through 114.00 figure as the day proceeds.

Boris Schlossberg
Managing Director

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