NY Open: 'Dancing Queen' May fails to shift sterling
FX Trader, Loonieviews.net
Summary: UK prime minister Theresa May might have scored a political victory at the Tory conference today, but it has not lifted sterling's fortunes with GBPUSD still stuck in its 1.2940-1.3210 range.
On the soundtrack to the 1980 movie Urban Cowboy, Johnny Lee sang about “looking for love in all the wrong places.” Today, markets are doing the same with direction.
European traders thought they found direction in Italy. Comments about the benefits of leaving the euro by Italy First politician Claudio Borghi spooked markets, as did Deputy Prime Minister Luigi De Maio’s defence of the 2.4% budget deficit. Benchmark Italian yields climbed to 3.44% and European stock markets dropped, as did EURUSD.
New York traders weren’t nearly as bothered by the European shift to risk-aversion trades. They sold US dollars across the board in a bottom-fishing, profit-taking move. They may be more concerned about Fed chair Powell’s speech titled “The Outlook for Employment and Inflation.” Realistically, other than the new US-Mexico-Canada agreement, there isn’t anything new since the post-FOMC meeting press conference last week.
The GBPUSD plunge has found a modicum of support above the European low of 1.2940 with prices probing 1.2977 as of 14:00 GMT, thanks in part to a weaker-than-expected ISM NY business conditions reading of 72.5 (August was 76.5).
The UK Conservative Party conference isn’t doing Sterling any favours, especially with Boris Johnston slamming Theresa May’s Brexit plan. Brexit issues should cap GBPUSD topside. The GBPUSD technicals are bearish below 1.3050 with a break of the 1.2920-30 area opening the door to further losses to 1.2670.
Wall Street is trading with a mixed tone around flat. Tesla (TSLA: xnas) continues to slide on Elon Musk’s woes despite news that deliveries improved in Q3.
Oil prices are continuing their steady climb toward $100/barrel. President Trump’s sanctions on Iran take effect November 4 and traders fear a supply shortage. The Canadian dollar is befitting from the rise in oil prices, despite the hefty discount for Canada’s benchmark crude, Western Canada Select.
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