The pound is posting solid gains on the day as Boris Johnson manages to strike a deal with European leaders, although now the big question remains, is the DUP on board and can Johnson get this through a parliamentary vote?
There is plenty of optimism so far but it has to be put into context. Theresa May also had a Brexit deal but could not get hers through parliament at the end of the day. Will it be different for Johnson?
Update: A couple of news sources are reporting that the DUP isn’t quite on board just yet and that is seeing the pound pare some of its gains. Cable back down to 1.2920 from a high of 1.2990 earlier.
The pair is up 850 pips in the past four trading days
The best place to see the combination of the turn in sentiment on Brexit and the US-China trade deal is in GBP/JPY. The pair has rallied to 139.24 from 130.73 early on Friday.
That’s a monster rally by any standards and captures the squeeze in the pair. Once again today it’s the best-performing duo in a signal that there might be more of a squeeze left.
In the bigger picture, we’re now at the highest levels since May and resistance has now turned to support. The 135.66 level proved to be the retracement to buy this week and unless talks fall apart, I don’t think we will see that again.
Instead, look to the 137.80-138.00 range as an opportunity to buy.
A report suggesting the UK and EU are on the cusp of a Brexit deal has sent the pound to the best levels of the day.
Cable is up 135 pips to 1.2743. The break above 1.2714 is the first rise above the 200-day moving average since May. With the break, the next level to watch is the June high of 1.2784 and the figure at 1.2800.
The rise in the pound has also lifted EUR/USD and yen crosses.
Update: Fresh highs in GBP/USD to 1.2797, breaking the June high and touching the best level since May 16.
The headline is the in summary version of a client note from UBS on the US dollar.
Its a detailed look at the US dollar trend, but adding to the to the headline points in brief.
When and how the dollar might turn is anyone’s guess
longterm dollar trend … As of last month, it was still levying upward pressure … did not appear to be waning materially
medium term trend … duration of 2-5 years … more or less mirrors intra business cycle growth surges and slowdowns
shorter term one that averages about a year…. seems to relate to shocks caused by politics and supply disruptions to commodities … a modest dollar drag today … could reflect the … trade war coming home to roost and the drag on Chinese leading indicators passing, as fiscal stimulus from tax cuts and modest credit easing have begun to filter through