We started the day with continuation of selling into GBP as more and more report on PM May’s hard Brexit talk.
Then in London session the CPI came as a beat with positive number, however, that did not provide too much volatility as all eyes were on the PM Speech in next 2 hours.
Then finally the speech was given.
You can view the speech content at Forexlive but just give you a board part, i think the speech was neutral with positive note on acknowledge the deal of Brexit will go through the parliament but also the negative note that Britain might lose the single market access.
The GBP surged higher against all pairs to more than 300 - 400 pips.
Was it because the positivity from the Speech?
No, as mentioned, this is really the classic example of buying rumour and selling fact.
The fact is that whenever you have a sudden movement of 300 - 400 pips in the market ahead of an event, you can expect to see a large recovery after the event becomes the fact.
It happened in Brexit, happened in U.S election, happened in Italy Referendum, and it happened again today.
Of course, don’t take it as a certainty as the market could have easily sold more GBP, the thing about trading the risk event is really to understand what the traders feel and believe, and ride on that trend of believe.
oil market had very little effect today and equity markets were all down.
The equity markets were down from uncertainty of Donald Trump, the dollar was largely sold off because of that and his comment on the weekend about strong dollar hurting trade with China.
The weak dollar has helped the oil market and supported the CAD.
We will expect to see a continuation of downside movement in equity markets and dollar all the way until Friday, or even longer. The market needs new confidence into U.S in order for us to see USD regain strength.
For all other currencies, AUD & NZD remain to be strong in the absent of USD, EUR was largely sold off due to the strength of GBP and pretty much all GBP pairs have lost the battle versus GBP.
Right now the strongest currency fundamentally is still USD, but not a good sentimental timing to buy it.
AUD & NZD on the other hand have proven to be very strong, the JPY & CHF also benefited largely from the volatility and risk off sentiment in the market now.
CAD is supported by USD weakness but tomorrow’s BOC event might turns it around and continue its strength.
Today we have GBP datas which will be a good event to buy more GBP if we have a positive result.
Claimant Count change (smaller number means better for GBP)
Max 10K (negative deviation)
Min -5k (positive deviation)
Max 4.9% (negative deviation)
Min 4.8% (positive deviation)
Average Weekly Earnings 3M y/y
Max 2.7% (positive deviation)
Min 2.5% (negative deviation)
GBP/USD will be our choice.
USD datas will come in NY session which will be a good event to sell USD.
Core CPI m/m
AUD/USD will be our choice for selling USD and USD/JPY will be our choice to buy USD.
Finally, the BOC rate decision is expected to be the same so the catalyst will be the press conference which might provide more insight for CAD.
Later in Asian session we will have employment datas from AUD which will be a good catalyst to get in on the positive deviation. Again, because of the strong sentiment in AUD, we will not sell it upon negative deviation.