European Currencies Advance on Brexit Hopes

European Currencies Advance on Brexit Hopes


The British pound gained more than one percent against the United States dollar and the Japanese Yen, as Britain and the European Union reached a preliminary Brexit text. The GBPUSD reached a high of $1.3047, and the GBPJPY rose to a high of 148.72. The UK cabinet will meet today and is likely to agree on the text. However, Theresa May should bring the proposal back to the parliament to debate and pass a meaningful vote. May must secure 320 votes to pass the deal, or else we could be heading to uncertainty again. On the other hand, the September Average Earnings Index including Bonus rose to 3.0% from 2.8% in August. In addition to the outcome of the Cabinet meeting, market participants will focus on the inflation figures of October.


The dollar index which measures the greenback against a basket of major currencies retreated from a sixteen-month high of 97.69 to settle lower at 96.96. The drop occurred due to the higher chances of a Brexit deal which improved investors' confidence. The fundamentals from the United States continue to show that the US economy outperforms its rivals. Investors will be waiting for the US inflation data today where a better-than-expected reading will raise the chances of an interest rate hike in December. The USDJPY traded at a low of 113.56, and USDCHF fell to 1.0058.


The euro appreciated by 0.6% against the United States dollar to settle at $1.1288, supported by improved risk sentiment. However, the Euro will remain vulnerable to any developments regarding Italy's budget plan. Italy's Deputy Prime Minister Salvini announced that the government kept the 2019 budget targets for deficit and GDP growth unchanged.


Gold prices traded slightly higher as the dollar faltered. The gold ounce bounced from a low of $1196 to settle higher at $1202. On the other hand, the silver ounce posted its lowest daily close of $13.98 since January 2016.


Oil prices extended losses due to a surge in supply and woes of a global economic slowdown. Prices lost more than 25% since early October, the worst decline since the prices collapsed in 2014. The West Texas Intermediate crude futures tested a fresh 2018 low of $54.79, and the Brent futures fell to an eight-month low of $64.69.

Major Economic Events

GMT Country Event Expectation Previous
9:30 UK CPI (YoY) (Oct) 2.5% 2.4%
9:30 UK Core CPI (YoY) (Oct) 1.9% 1.9%
Tentative EU EU Finance Ministers Meeting    
10:00 EU GDP (YoY) (Q3) 1.7% 1.7%
13:30 US Core CPI (MoM) (Oct) 0.2% 0.1%
13:30 US Core CPI (YoY) (Oct) 2.2% 2.2%
21:30 US API Weekly Crude Oil Stock   7.830
23:00 US Fed Chair Powell Speaks    


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