Summary:
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GBP recovers from weakness early in the week
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Largest gains seen vs JPY and CHF
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China announce RRR cuts
Brexit has dominated the news flow through the week with headlines coming thick and fast as parliament wasted little time in getting to work following their summer recess and essentially going someway to taking a no-deal outcome off the table once more. Boris Johnson’s plans for a general election in the middle of October have seemingly been thwarted for the time being and hopes for a resolution to the Brexit stalemate anytime soon are once more starting to look little more than wishful thinking. Prolonged periods of uncertainty is typically associated with weakness in a currency, but the pound has responded positively to the latest developments as the fading prospects of a no-deal have attracted buyers back into the market.
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After coming under pressure at the start of the week the pound has staged something of a recovery, aided by the receding prospects of a no-deal. The currency has gained in excess of 1% on the US dollar and just less than that vs the Euro. Source: xStation
China announce RRR cuts
A bout of monetary easing from Beijing has provided a boost to risk assets in recent trade, although this move may be fleeting given the size and scope of the measures announced compared to market expectations. The required reserve ratio will be cut by 50 bps, effective from 16th September with the PBOC expecting this to release CNY 900B. European stocks moved up to their highest level since the start of August on the news but have already faded back from there and traders no await this afternoon where a couple of key events from the US are likely to shape risk sentiment into the weekend. First up we get the August jobs report at 1:30PM (BST) with the consensus call amongst analysts seeing a non-farm employment change reading of +163k. After the European close, Fed chair Powell is set to speak in Zurich and any hints towards monetary policy here could cause heightened volatility into the weekend.
The German Dax made a fresh high on the news but has since fallen back and printed another shooting star no H1. Price has rallied over 300 points in the past week or so and the tape may be starting to get a little tired. Highs around 12180. Source: xStation
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