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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:

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

GMTCCYEVENTACTEXPPREV
05:30AUDForeign Reserves (SEP)A$65.8b-$63.0b

European Session

GMTCCYEVENTEXPPREVIMPACT
05:45CHFUnemployment Rate (SEP)3.2%3.2%Medium
05:45CHFUnemployment Rate SA (SEP)3.4%3.4%Medium
06:00EURGerman Trade Balance (AUG)19.5b19.5bMedium
06:00EURGerman Current Account Balance (AUG)15.0b18.6bMedium
06:00EURGerman Exports SA (MoM) (AUG)2.2%-2.6%Low
06:00EURGerman Imports SA (MoM) (AUG)0.7%-0.7%Low
06:30EURBank of France Bus. Sentiment (SEP)9998Low
08:00EURItalian Industrial Production (MoM) (AUG)-0.1%0.4%Low
08:00EURItalian Industrial Production WDA (YoY) (AUG)-0.3%-0.3%Low
08:00EURItalian Industrial Production NSA (YoY) (AUG)--6.3%Low
08:00CHFTotal Sight Deposits (OCT 7)-517.4bLow
08:00CHFDomestic Sight Deposits (OCT 7)-452.9bLow
08:30EURSentix Investor Confidence (OCT)6.05.6Low
13:50GBPBOE Bond-Buying Operation Results--Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.09681.10691.11351.11701.12361.12711.1372
GBP/USD1.07351.15171.19761.22991.27581.30811.3863

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

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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