Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

MarketScreener Homepage  >  Currencies  >  UK Pence Sterling **** / US Dollar (GBp/USD)       

My previous session
Most popular
News SummaryAll newsTweets

GBP/USD at Fresh Lows Post-Brexit Vote as Reality Crashes Down

share with twitter share with LinkedIn share with facebook
share via e-mail
10/04/2016 | 01:55pm CEST
DailyFX.com -

Talking Points:

- Japanese Yen down on rumors about BOJ policy tactics; purportedly will only ease if Yen strengthens.

- EUR/GBP at new yearly high, GBP/USD at fresh yearly low.

- See the DailyFX economic calendar for the week of October 2 to October 7.

The US Dollar is gaining ground broadly today, with the British Pound, Euro, and Japanese Yen all pitching in (AUD/USD is holding steady after the RBA rate decision). Given that the US Dollar's gains today aren't driven by domestic factors - US economic data continues to weaken, as per the Atlanta Fed GDPNow Q3'16 growth tracker - and that the US economic calendar is quiet ahead, it's worth examining these individual exogenous factors.

For the British Pound, fresh yearly lows are in today versus the Euro and the US Dollar (among others) on the back of fresh commentary regarding the triggering of Article 50 from UK Prime Minister Theresa May. As I warned at the end of August and followed up with last Monday, the onset of Brexit commentary from UK policymakers has tended to be negative for the British Pound as the new government is forced to reconcile the promises of the Brexiteers/Leavers with the realities of economics. Don't expect this trend to dissipate anytime soon.

As a current account deficit country, the UK needs a weaker British Pound; recent signs that the country is heading for a 'hard Brexit' suggests that trade will be impacted dramatically, worsening the CA deficit, further necessitating a weaker British Pound to keep the economy competitive. I wouldn't be surprised if we see GBP/USD drop into the mid-$1.1000s and EUR/GBP rally into the mid-£0.9000s in the event of a 'hard Brexit.' (This is not new; the dramatic divergence in UK and Japanese current accounts was one of the reasons I chose short GBP/JPY as my trade opportunity of the year.)

For the Euro, there's not much to look at on the calendar - PPI data was slightly weaker than anticipated, further underscoring the disinflation/deflationary overhang on the region. Instead, it seems that the sheer number of small negative stories on the Euro's periphery are adding up: Brexit back in the headlines; the ongoing trend of weak price data; Deutsche Bank still without a deal with the US Department of Justice. As noted previously, I believe the odds of another ECB rate cut this year are underpriced. See the Q4'16 EUR/USD forecast, "EUR/USD Coil Grows Tighter as Central Banks, Politicians Face Credibility Deficit."

For the Japanese Yen, weakness is afoot today amid rumors from "sources" that the Bank of Japan is going to tailor its monetary policy to prevent the Yen from strengthening significantly. Such a shift in policy would be more or less an admission of failure of Abenomics, and would likely usher in a wave of volatility across asset classes. It's rather telling that on a day where USD/JPY is gaining ground, US equity futures are rather mundane. Instead, it's weakness in the local currencies (Nikkei/JPY, DAX/EUR, FTSE/GBP) that are proving to be the drivers. Such price action, albeit too soon to confirm, is somewhat indicative of a 'zero-sum central bank policy' mindset reestablishing itself in the market - which is not good.

See the video (above) for technical considerations in EUR/USD, GBP/USD, USD/JPY, EUR/JPY, GBP/JPY, EUR/GBP, and the USDOLLAR Index.

Read more: EUR/GBP, GBP/JPY, & GBP/USD near Breaking Points as Brexit Fears Resurface

--- Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

original source
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.12% 0.72433 Delayed Quote.-6.68%
BRITISH POUND / JAPANESE YEN (GBP/JPY) -0.03% 147.875 Delayed Quote.-3.29%
BRITISH POUND / US DOLLAR (GBP/USD) -0.08% 1.31049 Delayed Quote.-3.11%
EURO / BRITISH POUND (EUR/GBP) -0.05% 0.89546 Delayed Quote.1.11%
EURO / JAPANESE YEN (EUR/JPY) -0.09% 132.428 Delayed Quote.-2.26%
EURO / US DOLLAR (EUR/USD) -0.13% 1.17363 Delayed Quote.-2.07%
NIKKEI 225 0.82% 23869.93 Real-time Quote.4.85%
UK PENCE STERLING **** / US DOLLAR (GBP/USD) 0.28% 0.013105 Delayed Quote.-3.11%
US DOLLAR / JAPANESE YEN (USD/JPY) 0.05% 112.833 Delayed Quote.-0.12%

© FXCM 2016
share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on UK PENCE STERLING **** / U
2016GBP/USD Triangle Breakdown Reaches First Fibonacci Extension
2016GBP/USD Flashes Oversold Signal; FX Sentiment Holds Near 2016-Extreme
2016GBP/USD TECHNICAL ANALYSIS : The British Pound Breakdown
2016GBP/USD Triangle Breakdown
2016GBP/USD at Fresh Lows Post-Brexit Vote as Reality Crashes Down
2016GBP/USD Pressing Bottom of Proposed Triangle
2016GBP/USD TECHNICAL ANALYSIS : Higher-Lows in Post-Brexit Range
2016GBP/USD 5th Point on the Triangle
2016GBP/USD to Face Fresh Monthly Lows on Hawkish Fed Rhetoric
2016GBP/USD to Face Fresh Monthly Lows on Hawkish Fed Rhetoric
More news