FX Update September 29 – USD & Yen slip, GBP still in focus

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By: Stuart Cowell

The Dollar and Yen are softer, with both currencies continuing to correlate inversely with the global stock market direction. EURUSD posted a four-day high at 1.1694, extending the rebound from the two-month low that was seen last Friday at 1.1612, and EURJPY lifted to an eight-day peak at 123.50.

Cable and GBPJPY have seen a similar price action. The Pound outperformed yesterday on encouraging signs about EU and UK trade negotiations, which comes with the final week of talks having commenced in Brussels. The London Times reported that the EU has dropped its demand for a broad agreement to be reached on all outstanding areas of dispute (fishing rights and state aid) before drafting a final agreement, and is a significant sign of progress, that this week’s talks will include extra sessions that will focus on the sticking points. What’s clear is that Boris Johnson’s political high jinks (introducing proposed legislation that would allow the UK government to unilaterally overwrite parts of the EU Withdrawal Agreement) haven’t thrown a wrench in the negotiating works as had been feared. What remains unclear is how extensive a deal the two sides will come up with, assuming that the no-deal risk is now much reduced.

Elsewhere, USDJPY remained settled in the mid 105.00s. AUDJPY rose into six-day high terrain, while AUDUSD also gained. The Aussie Dollar has been rising concomitantly with an abatement in RBA easing expectations. The Oct ASX 30-day interbank cash rate futures closed in Sydney at 99.880, indicating a 64% expectation for the RBA to cut the official cash rate by 25 bp to 0.00% at the upcoming board meeting on October 6. This is down from the 77% implied odds that was seen last week.


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