Election countdown

We start a new month and quarter which is likely to be increasingly taken over by the impending Presidential election in the US, something which the market has largely managed to ignore up to now. To this end, the impending US employment report, due for release at the end of this week, could struggle to the usual impact on markets, given that current market pricing has less than a 20% chance of the Fed moving rates less than a week before the election. The December meeting is another matter, where the pricing puts the chances of a move as more likely than not, but given the Presidential election, that could well change substantially between now and then depending upon the result.

Looking to today, we start the week with sterling having gapped lower after the UK PM finally put a timeline on the UK’s exit from the EU. We’ve seen cable break below the 1.29 level at the start of the European session, whilst EURGBP is close to making new highs for the year, which could trigger further bearing activity on the sterling if seen. Elsewhere, the yen continues to retreat, allowing USDJPY to once again pull away from the 100 level. The Tankan survey overnight showed mixed messages on the state of the Japanese economy. Deutsche Bank is never far from the headlines, with much talk over the weekend from the German political establishment as to where we go from here. For today, we see UK PMI data at 08:30 GMT, with US USM data following at 14:00 GMT. Trading is likely to remain muted ahead of the US jobs numbers on Friday.

Did you know?

If overwhelmed by pessimism and falling prices, the FX market is defined as “bearish”, while if characterised by optimism and rising prices, it is called “bullish”. These two terms derive from the way in which bears and bulls attack their opponents, with the former swiping its paws downwards and the latter thrusting its horns upwards.

Word of the day
"Pip" - The smallest increment in which a currency pair can move. It is usually the fourth decimal place of the quote currency in a pair. In the case of the Japanese yen (JPY), it is the second decimal place of the quote currency.
Pro Tip

Higher leverage --> Less funds required as margin / Lower leverage --> More funds required as margin

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