The Pound is Still Vulnerable Without a UK Deal With the EU (Weekly Review)

Waiting for celebrations of Thanksgiving Day in the United States and due to the absence of important events in the macroeconomic calendar, participants in the foreign exchange market showed no significant activity last week. Despite continuing low volatility, there were some sharp movements, and we are talking about the British pound, which, according to the established tradition and depending on the incoming news on Brexit, can either grow rapidly or fall rapidly.

Thus, remaining under pressure from sellers, it initially was traded in a rather narrow range paired with the USD, but it was redeemed for news on the preparation of a draft EU agreement with the UK on Brexit, which triggered growth across the market and, of course, against the USD. Soon investors, having doubts that the deal would be approved by the British Parliament, started to close the GBP long positions, and at the end of the week it returned to the levels that preceded the growth.

The EUR, in its turn, could not consolidate its achievements of the previous week. Along with the differential of interest rates, political risks in Italy and weak statistics for Germany, it gradually lost the positions won from the USD, and ended the week near the level of 1.1330. And if the GBP has a chance of growth in case if the parties fully agree on Brexit conditions, the EUR is unlikely to develop an upward trend after it, unless the EU makes concessions to the Italian government on the draft budget. Consequently, in the absence of good news, neither the pound bulls nor the euro bulls will be able to reverse the current trend.

Schedule for this week:

Monday, November 26
09:00 GMT – Eurozone. European Central Bank Representative Praet Speaks;
09:00 GMT – Germany.  IFO Business Expectations;
09:00 GMT - Germany. IFO Current Assessment;
09:00 GMT - Germany. IFO Business Climate Index;
14:00 GMT – Eurozone. European Central Bank President Draghi Speaks;
18:30 GMT – United Kingdom. Bank of England Governor Mark Carney Speaks.

Tuesday, November 27
22:45 GMT – New Zealand. Trade Balance;
22:45 GMT - New Zealand. Import/Export;
13:55 GMT – USA. Redbook Index;
14:00 GMT – USA. House Price Index.

Wednesday, November 28
09:00 GMT – United Kingdom. BoE Financial Stability Report;
12:00 GMT – Germany. Gfk Consumer Climate;
13:30 GMT – USA. Core Personal Consumption Expenditure (PCE) Prices (QoQ) (Q3);
13:30 GMT - USA. Personal Consumption Expenditure (PCE) Prices (QoQ) (Q3);
13:30 GMT – USA. GDP (Q3);
13:30 GMT – USA. GDP Price Index (Q3);
17:00 GMT – USA. Federal Reserve Chair Jerome Powel Speaks.

Thursday, November 29
23:50 GMT – Japan. Foreign Bonds Buying;
23:50 GMT - Japan. Foreign Investments in Japanese Stocks;
23:50 GMT – Japan. Retail Sales;
00:00 GMT – Australia. New Home Sales;
01:30 GMT - Japan. Bank of Japan Board Member Takako Masai Speaks;
08:55 GMT – Germany.  Unemployment Change;
08:55 GMT – Germany Unemployment Rate;
09:30 GMT - United Kingdom. Mortgage Approvals;
09:00 GMT - Eurozone. Business Climate;
11:30 GMT - Eurozone. Financial Stability Report;
13:00 GMT – Germany. Harmonised Index of Consumer Prices (HICP);
13:00 GMT - Germany. Consumer Price Index (CPI);
13:30 GMT – USA. Initial Jobless Claims;
13:30 GMT – USA. Personal Spending;  
13:30 GMT – USA. Personal Income;
13:30 GMT – Canada. Current Account (Q3);
19:00 GMT – USA. Federal Open Market Committee (FOMC) Meeting Minutes;

Friday, November 30
21:45 GMT – New Zealand. Building Consents;
23:30 GMT – Japan. Unemployment Rate;
23:30 GMT – Japan. Tokyo Core Consumer Price Index (CPI), excluding fresh food (YoY) (Nov);
01:00 GMT – PRC. NBS Manufacturing Purchasing Managers Index (PMI) (Nov);
01:00 GMT – PRC. Services Purchasing Managers Index (PMI);
07:00 GMT – Germany. Retail Sales;
10:00 GMT - Eurozone. Core Consumer Price Index (CPI);
10:00 GMT - Eurozone. Consumer Price Index (CPI);

10:00 GMT – Eurozone. Unemployment Rate;
13:30 GMT – Canada. GDP Annualized (QoQ) (Q3);
14:45 GMT – USA. Chicago Purchasing Managers Index (PMI).

Author: Anthony Porter, IAFT Analyst