Reports of draft Brexit deal lift GBP and stock indices

Summary:

• GBPUSD surges above $1.27 on draft Brexit deal reports

• DE30 hits YTD high

• Mixed results for banks as US earnings season kicks off

• Cocoa prices sharply up again 

 

There’s been a swift move higher in the pound in recent trade after news crossed the wires that EU and UK negotiators are closing in on a draft Brexit deal. Bloomberg citing two people with knowledge of the talks have reported this story although they do caution that it hinges on DUP support. GBPUSD has smashed up through the $1.2750 region to trade at levels not seen since May and the market is clearly backing a positive resolution later this week from the EU summit. 

 

The news has also contributed to a wider risk on move in other asset classes with the indices and Gold dropping to daily lows. The DE30 has surged up to post a new 2019 high above 12650 while the US500 moved back to the 300 handle.  US markets have shrugged off some earlier negative trade headlines from China and are sitting on sizable gains at the time of writing. 

 

 Trade has dominated the headlines as far as Wall Street is concerned in recent weeks and while it is unlikely to disappear anytime soon, there is a new driving force to keep an eye on as the Q3 earnings season kicks off in earnest today. Several of the largest financial firms have reported their latest trading results ahead of this afternoon’s opening bell with the overall feeling somewhat mixed with JP Morgan putting up some solid numbers while Goldman Sachs announced a disappointing miss.

A more in-depth look at the results can be found here. 

Cocoa prices are rising sharply once again, gaining 2.7% on Tuesday. Prices are up nearly 15% over the past 2 months, partly on the back of stronger British pound as a large portion of the commodity is sold in this currency. Technically market faces a resistance zone around $2550.