Sterling, Down For 3 Weeks Then Boom!

There were extraordinary scenes in dealing rooms across the world yesterday when, Sterling, which has been sliding perilously downwards, suddenly got a new lease of life. This astonishing, upward shift in the currency came after news that PM Johnson and Irish PM Varadkar, had released a joint statement saying they could "potentially see a path to a deal." It almost fully reversed the three weeks's worth of losses in less than two hours; and by close of business today was trading at 3-month highs.

The UK and EU chief Brexit negotiators, Barclay and Barnier are meeting today, with Barnier also meeting with Varadkar, so Barnier’s comments post these meetings are going to be important in regards to FX volatility.

Positive comments from President Trump, after the first day of negotiations with China also helped support global risk sentiment. Focus will now turn to the comments following Trump’s meeting with Chinese Vice Premier Liu today and whether real progress is made and the details of any partial deal, if one is achieved. Otherwise, it is another light calendar data today. The main US data release is the preliminary read of October consumer sentiment (University of Michigan survey). It is probably fair to characterise sentiment as resilient, supported by ongoing jobs growth, but it has been drifting slowly lower as a result of concerns about trade tensions. Markets are looking for a fall in the headline index to 92.0 from 93.2.

Canada will also release labour market figures today, with employment forecast to rise by 5k and the unemployment rate unchanged at 5.7%. General data has been softening in Canada since May, so the market will be looking for whether this is a temporary pullback or something more significant.

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See you next week!