Stakes for GBP traders rise on Brexit breakthrough

Today we get a look at the latest US CPI data point, and given the massive new slide in oil prices, this could offer little impact as oil prices have now fallen so steeply that near-term hotter than anticipated inflation might be overlooked when oil has now fallen over 25% and is at the lows for the year in the US.

The G-10 rundown

USD – EURUSD squeezed above 1.1300 briefly overnight, but damage limited if we can hold below that level through the UK cabinet’s crunch meeting today.

EUR – EURUSD squeezed briefly back above 1.1300 overnight – likely on the combination of heavy speculative shorting with stops above that level and the Brexit deal news squeezing GBPUSD and EURUSD positions.

JPY – treasuries area rather bid in the US, possibly on the accelerating drop in oil prices, which will feed into future inflation prints around the world. EURJPY looking more at risk of downside than USDJPY if Brexit process yields to chaos and Italian populist worries are reaggravated as the next phase of the populist revolt washing over Europe.

GBP – significant two-way risk to say the least – more information and reaction potential in a cabinet rejection than a cabinet approval, as the latter is the first step down a path that the market has partially priced in, while the former (rejection) violently changes the plot.

CHF – the Swiss franc putting a gently optimistic face on Brexit deal chances – same knee-jerk risks for EURCHF as for EURGBP (negative correlation) depending on the direction this takes.

AUD – the outperformance easing here but we won’t get a real sense of where the Aussie stands until we know China’s plans for its currency.

CAD – oil plunge sees only modest damage to CAD’s fortunes – USDCAD continues to look higher while we get contrarian on the likes of AUDCAD and NZDCAD here, where the backup looks excessive.

NZD – the run higher continues – surely it exhausts itself ahead in 0.6800-50 area in NZDUSD if the USD remains firm. AUDNZD trending nicely, but enormous multiple-touch trend line coming up near 1.0600.

SEK – a modest CPI disappointment probably weighing more on the krona’s fortunes than the fresh news that the latest attempt to form a government has failed. Chunky oil price sell-off also might weigh in assessment of future speed of Riksbank hikes. EURSEK bears will be disheartened if EURSEK closes back above 9.30 here.

NOK – a massive fall in crude oil inpsires a squeeze above the 200-day moving average in EURNOK. But hard to believe a new up-trend in motion here – let’s see if the move holds. 

Upcoming Economic Calendar Highlights (all times GMT)

1000 – Eurozone Industrial Production
1000 – Eurozone Q3 GDP estimate
1000 – Eurozone Q3 Employment
1330 – US Oct. CPI
1400 – UK Govt. Cabinet Meeting
1500 – US Fed’s Quarles to speak
1600 – Bank of Canada FS Survey Highlights
2300 – US Fed Chairman Powell to speak