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British Pound Remains on the Defensive Following Flash Crash

British Pound Remains on the Defensive Following Flash Crash

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Yen gains as US-listed Nikkei futures drop after remarks from BOJ’s Kuroda
  • Canadian Dollar recovers following Russia-linked selloff alongside crude oil
  • British Pound on the defensive as Brexit jitters remain following flash crash

The anti-risk Yen traded higher as US-listed Nikkei 225 futures declined in overnight trade. Japanese markets are closed for a holiday. The move may have followed comments from BOJ Governor Kuroda over the weekend, who said the central bank may delay hitting the inflation target until 2018. The comments may have stoked recent skepticism about the efficacy of the central bank’s stimulus efforts.

The Canadian Dollar recovered in a move that appeared to be corrective after Friday’s broad-based selloff. The Loonie fell against all of its major counterparts save the British Pound (where the so-called “flash crash” distorted price action), tracking crude oil prices downward. That move seemed linked to Russia signaling it would not reach a deal with OPEC to cut back output at a meeting in Istanbul this week.

For its part, the Sterling remained under pressure in Asian hours. The UK unit faces a potentially tumultuous week ahead as Prime Minister Theresa May heads to Denmark and the Netherlands for bilateral talks with Prime Ministers Rasmussen and Rutte ahead of this month’s EU leaders’ summit. Increasingly fiery rhetoric on both sides of the English Channel has already exploded in epic fashion and may do so again.

The economic calendar is in quiet in European and US hours, leaving the markets to digest recent price action ahead of this week’s headline event risk. Knee-jerk volatility remains a risk however. Bild reported that Deutsche Bank failed to secure a penalty reduction deal with US regulators, which may rekindle insolvency fears and bleed into broader market sentiment. S&P 500 futures are pointing upward however, hinting investors’ mood is relatively chipper for the time being.

Losing money trading in the FX market? This might be why.

Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

05:30

AUD

Foreign Reserves (SEP)

A$65.8b

-

$63.0b

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

05:45

CHF

Unemployment Rate (SEP)

3.2%

3.2%

Medium

05:45

CHF

Unemployment Rate SA (SEP)

3.4%

3.4%

Medium

06:00

EUR

German Trade Balance (AUG)

19.5b

19.5b

Medium

06:00

EUR

German Current Account Balance (AUG)

15.0b

18.6b

Medium

06:00

EUR

German Exports SA (MoM) (AUG)

2.2%

-2.6%

Low

06:00

EUR

German Imports SA (MoM) (AUG)

0.7%

-0.7%

Low

06:30

EUR

Bank of France Bus. Sentiment (SEP)

99

98

Low

08:00

EUR

Italian Industrial Production (MoM) (AUG)

-0.1%

0.4%

Low

08:00

EUR

Italian Industrial Production WDA (YoY) (AUG)

-0.3%

-0.3%

Low

08:00

EUR

Italian Industrial Production NSA (YoY) (AUG)

-

-6.3%

Low

08:00

CHF

Total Sight Deposits (OCT 7)

-

517.4b

Low

08:00

CHF

Domestic Sight Deposits (OCT 7)

-

452.9b

Low

08:30

EUR

Sentix Investor Confidence (OCT)

6.0

5.6

Low

13:50

GBP

BOE Bond-Buying Operation Results

-

-

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.0968

1.1069

1.1135

1.1170

1.1236

1.1271

1.1372

GBP/USD

1.0735

1.1517

1.1976

1.2299

1.2758

1.3081

1.3863

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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