The Week Ahead in FX: Brexit Headlines to Determine the Pound’s Fate

Market Analysis /
19 Nov 2018
  • Brexit headlines have been pulling Sterling in all directions
  • US Dollar has weakened but the currency is set to benefit if the focus shifts back to interest rates
  • Australian Dollar eyeing the 0.7380 resistance region

 

There aren’t many guarantees when it comes to financial markets, but it’s a pretty safe bet that Brexit will be back in the headlines this week. To say that the British Pound was on a rollercoaster ride last week would be an understatement, with the GBPUSD rate being pulled in all directions as traders reacted to the latest news in the ongoing saga. And we could be in for more of the same this week, making the British Pound rather tricky to trade now with the currency’s fate very much in the hands of British and EU lawmakers.

But where there’s volatility, there’s also opportunity and the Cable fluctuations will be interesting to watch, but as to which side of the 1.30 level it will sit next week at this time is anyone’s guess. While most of the action will be driven by Brexit headlines, traders will also be closely watching BOE Governor Mark Carney when he testifies before a Parliament Committee as part of the Inflation Report Hearings on Tuesday.

The US economic calendar is quite sparse this week, with the main highlights being Core Durable Goods Orders, Housing Starts and Crude Oil Inventories all due up on Wednesday (US time). But with the Thanksgiving holiday on Thursday, market liquidity will thin out towards the back end of the week. If the US Dollar is to make gains it will likely be in a scenario where the prospect of tightening US interest rates again becomes a central source of concern for the broader market. Equity and bond yield movements this week will be good indicators of whether this is occurring.

Greenback softness has led to a resurgent of sorts in the Euro, while signs of easing tensions between the EU and Italy over the Italian budget plans have also aided the single currency. Flash Manufacturing and Services PMI numbers will be released for the Eurozone on Friday.

The Australian Dollar remains buoyed by the expectation-beating employment numbers, and with the US Dollar on the backfoot the currency was able to reclaim the US$0.73 handle. A move higher in the gold price to close out last week also gave a boost to the Aussie Dollar, and if the greenback weakness persists then the AUDUSD rate may be eyeing off a run towards the 0.7380 resistance region. With no Chinese economic data due this week, traders of the Aussie Dollar will await the release of the RBA Monetary Policy Minutes as well as a speech by the RBA Governor, both of which occur on Tuesday.

Elsewhere, the Canadian Dollar remains pressured by weakness in the oil price. The fortunes or otherwise of the ‘loonie’ this week will be determined by not only what happens with crude but also by the release of CPI and Retail Sales data on Friday. Meanwhile, Bank of Japan Governor Kuroda will be speaking on Tuesday, though the Yen will most likely be influenced by the state of broader risk-sentiment this week and the US Dollar performance.

For a full list of this week’s economic data releases, please visit Axitrader here.

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