General market theme
Limited price action at the end of last week with the major currencies looking for fresh stimulus to dictate the direction and we believe there are going to be plenty of opportunities as we move forward. The US Dollar remains in focus as we’re getting closer to the end of the year and investors are beginning to discuss whether the possibility of no new rate hikes this year is real.
We will have the opportunity to hear from several Fed presidents this week in order to better assess what they’re thinking ahead of the upcoming NFP report for the past month. At the same time the Pound is making headlines again as Brexit-related news and concerns are surfacing again pressuring the UK currency to the downside.
Price action highlights
The Euro made an effort to reach its previous 1.1250 highs on Friday but the momentum was lacking and the upswing only reached to the 1.1230 area before settling around there. The Single currency is in the focus for the day ahead as the release of the IFO Survey is the most market-moving event of the day but expectations are mixed. At this point for the Euro to benefit a clear bullish reading is needed and we doubt we could see something like that and we expect more sideways trading for the Euro at least for the time being.
The Cable came under pressure on Friday and collapsed from the 1.3100 area to trade near the 1.2900 level as fresh Brexit news drove investors towards safer havens. Recent rumors that the British Government is contemplating over triggering the Article 50 exit clause at the beginning of next year made market participants nervous, especially since we’re seeing no progress in the trade agreements the government is supposed to be negotiating right now. However with limited Dollar strength the Pound is not likely to continue falling for a sustained period of time so we need to keep calm and patient.
Focus of the day
The release of the IFO Survey is the most attractive report of the day but apart from that ECB President Mario Draghi will be speaking in the European Parliament in the afternoon and his comments always have the potential to change the dynamics in the markets. Other than that several Fed speakers will be speaking this week with Tarullo and Kaplan being the first ones today.