USD: Another weekend, another missile launch
You may have forgotten about Korea but a missile test that saw a North Korean missile fly over Northern Japan this morning has made sure that the Korean peninsula is front page news once again. The typical safe havens of the Swiss franc and the Japanese yen responded positively with the USD mixed on the session. We will have to wait to see whether this test will provoke a typically bellicose response from the White House. Japan has asked the United Nations Security Council to hold a meeting and while international condemnation may be forthcoming, it may not have any effect.
Trump’s announcement over the weekend that he may ‘terminate’ NAFTA prompted a rise in USD/CAD and USD/MXN.
EUR: Driving towards 1.20
EUR/USD is on the cusp of hitting 1.20 for the first time since January 2015 this morning following the Jackson Hole economic symposium which saw neither Janet Yellen nor Mario Draghi materially add to the rhetoric as to how their respective central banks see monetary policy evolving in the coming months. The fact that Mario Draghi did not expressly use his speech to caution against the recent strength of the euro emboldened those traders who wanted to take the single currency higher and so they have.
GBP/EUR got as low as 1.0788 in early trade on Sunday night and it is very much in the crosshairs as the 3rd round of Brexit talks begins in Brussels this week.
GBP: UK urged to ‘get serious’ on Brexit
David Davis, Michel Barnier and their respective teams are back in Brussels to further debate the terms of the UK’s withdrawal from the European Union. The decision by the Labour Party to reverse their position on Brexit and now back a stance that calls for membership of the Single Market is the most significant political move since the General Election. With the election fought, won and the partnership with the DUP Theresa May had successfully managed to depoliticise Brexit given the Labour and Conservative positions were not that far apart; they now are and Brexit is once again a political football with Parliament due to return next week.
In Brussels, we simply must see progress. Reports in the media suggest that the UK’s relative silence on the level of any ‘divorce payment’ will be the next stumbling block as we come up on the October soft deadline for ‘significant progress’ so talks on trade can begin. It is EU Chief Negotiator Barnier’s call alone as to whether we have made “significant progress” and his comments over the weekend suggest that we are a way off from that.
The Day Ahead
There is nothing major from the world’s central banks for once and the data calendar is also on the quiet side. With Jackson Hole out of the way and a clear narrative from either the Fed or ECB forthcoming both EUR and USD will remain data dependent in the coming weeks with events in Brussels, Washington and Pyongyang all ready to play a part.