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Article / 04 October 2016 at 11:26 GMT

Mid-session Europe: GBP back in the 1980s

Saxo Markets


Foreign exchange

If you're looking for the key forex-moving culprits Tuesday, look no further than USD momentum vs. low yielding currencies and the crystallization of UK plans for triggering Article 50. GBP has now reached the low of the 1980s.

European shares pushed up on Tuesday, with all sectors traded higher, led by the oil and gas, basic materials and industrials groups. CAC 40 drove 0.9% higher to 4,493 and FTSE MIB rose 0.4% to 16,337. 


  • US Weekly API Oil inventories (2030)

Forex developments

EURUSD: Today so far has been generally a USD positive day and high FX yielder day after a better than expected US Manufacturing releases yesterday that have relieved some recession fears in US. The EURUSD 200 daily moving average (1.1160) briefly breached on the USD momentum, and currently EURUSD captured between 100 day moving average at 1.1179 and the 200 day moving average. 1.1120 area is another interesting tech support around the lows in September and late August.

USDJPY: USDJPY also sees USD higher and crossing so far 55 day moving average at 102.09 area. USDJPY has failed to close above 55 DMA since 5 Sep. Key tech resistance still remains 102.80 where USDJPY struggled to break or remain above early Sep, and was the highs on the BoJ decision on 21st Sep.

GBP: Of course, it is also another day where the GBP is in focus and experiencing heavy selling since the end of the Asia session. Better than expected construction PMI did not lift GBP much before experiencing another round of selling. The GBPUSD downward channel base from September drop is around 1.2706 area. 1.27980 becomes the first tech resistance being the lows post Brexit referendum which was reached on 6 July. EURGBP is also trying reach top of upward channel which is at around 0.8770 which also happens to be the highs around week 29 July 2013. Risk in GBP is if we start seeing JPY strengthening.

FX Options volatilities
Market seems nervous ahead of NF on Friday. USD is bid against most things, and vols are trading higher together with rr, however EURUSD vols still pretty low.

GBP is making new lows, as it seems like the divorce process from EUR is speeding up, and vols are bid here too.

An interesting thing which has been out today is that Wikileaks have been talking about a leak that will be out on Wednesday, which will make “Hillary Done” not sure what to read into it, but if they have info that will make Hillary unsuitable for president, it’s a good idea to be long USDMXN (both spot and options).

Fixed income




European shares pushed up on Tuesday, with all sectors traded higher, led by the oil and gas, basic materials and industrials groups. CAC 40 drove 0.9% higher to 4,493 and FTSE MIB rose 0.4% to 16,337. 

In Germany, Deutsche Bank stock was back in action, gaining 1.5%, after a holiday closed trading on Germany’s markets on Monday. The gains for Deutsche Bank helped the DAX 30 to move up 0.7% to 10,580. Also higher on that index was car maker BMW AG, up 2.5% after a ratings upgrade to outperform at Exane BNP Paribas.

Meanwhile in London, the pound has been dogged by worries that the U.K. will make a “hard” Brexit from the European Union, in which it would break cleanly from the bloc’s single market.

Comments by Britain’s Prime Minister Theresa May this weekend spurred fresh concerns about the issue. 

Among the best performers, educational publisher Pearson PLC , which pushed up 5.6%, while Hikma Pharmacueticals rose 3.7%. The U.K’s FTSE 100 popped up 1.2% to 7,065. It moved above 7,000 for the first time since April 2015. 

The replay of our Morning Call can be found here.

Join our Weekly OptionsLab on Wednesday  to find out more on covered call strategy.

Read more

Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.

London lantern
 The City is in firing line due to May's hard Brexit plan. Photo: iStock

— Edited by Clemens Bomsdorf

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