The news circling yesterday around Brexit led to anticipation of an end of January extension likely being granted, with an option for early December depending on successful prior discussions. This was caveated with a firm exclusion on any amendments to the Brexit deal in place by Boris Johnson.
This morning we wake up with some further optimism, as it seems the EU is all but set to grant the extension by Thursday this week, with Macron confirming his agreement to the extension, which takes some of the downside weight off the pound.
Meanwhile, this afternoon Johnson will be leaning on pushing through a general election, with the voting requiring a two-thirds majority. It is seen as a far-fetched outcome at present but a busy afternoon will keep the GBP busy.
Markets are buying on open with a jump up to 1.2850 on the USD, whilst the GBPEUR moves up to 1.1580.
The key market volatility is likely placed around the Federal Reserve this week, with the rate decision this Wednesday. There has been a lot of back and forth in the lead up to October’s decision; on the one hand reports say that markets have all but entirely priced in a 25 basis point cut into the rates, with Bloomberg citing 90% pricing in to the USD, yet the discussions of a hold still remain prominent amongst the industry, possibly leading to a misaligned pricing that could unwind very quickly should the outcome differ.
The lack of commitment to following rate cuts remains a forecasting issue, with the EURUSD likely to take the brunt of this in the short term.
Have a great day,