The dominant theme of the past two weeks, namely dollar strength, has been taking a bit of a breather over the past few sessions. The pattern of trading on the US 2 year bond has also helped this more corrective activity, moving back towards the 0.80% level. But that’s not to say the market is getting less doubtful of a Fed tightening by the end of the year, more than it is taking stock along the way. Sterling is also taking a breather after the weakening trend of recent weeks. EURGBP is currently flirting with the 0.90 level, whilst cable has become ever more consolidative above the 1.20 level. The currency is getting ever more sensitive to the ebb and flow of sentiment with regards to Brexit, with the latest reports (FT) suggesting that the UK could continue to pay into the EU budget in return for access to the single market. The rhetoric on both sides continues to be divisive though, so there remains huge uncertainty as to exactly what Brexit will look like.
For this week, the ECB meeting looms large on Thursday. As is normal, it’s more about the rhetoric than the actual policy moves, especially given recent reports regarding the potential for a tapering of its bond buying program next year. Ahead of that, we have a swathe of data from China on Wednesday (including Q3 GDP), where the focus on the currency is becoming stronger as USDCNY continues to move north above the 6.70 level. For today, there is just US industrial production at 13:15 GMT, with speakers from the BoE (Broadbent), Fed (Fisher) and the ECB (Draghi) scheduled for later in the day.