Sterling softens further

The sterling headline writers have had their day as cable pushes past the post-Brexit lows, with cable now at levels last seen since 1985. This follows on from the weekend announcements regarding the Brexit timeline from the UK PM, with other inferences from the weekend suggesting that this is going to be a ‘hard Brexit’, with an increased belief that the UK will not be part of the single market, including financial services. Sterling currently stands just below the 1.28 level on cable, with EURGBP also making new highs for the year having pushed above the mid-August highs of 0.8725. The data is proving to be secondary to the longer-term outlook, but the CFTC data continues to show that the market is very short GBP, so there remains an underlying risk of reversal at some point.

Overnight, we’ve seen the new RBA governor (Philip Lowe) sit on his hands at his first RBA meeting. No great surprise with that and there was no change in the RBA’s language on the exchange rate. The RBI is also expected to keep rates on hold today. Otherwise, the data calendar is light, as markets waiting for Friday’s jobs data. The focus remains very much on the December meeting though, given the proximity of the early November one to the Presidential election in the US. The dollar continues to have a modest underlying bid as a result of such expectations.

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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