A good day for GBP as EU sounds concessionary note on UK single market access

Business as usual for the USD, but fresh highs a struggle despite US yields power higher again.  

Thursday was one for Sterling, as gains – already under way – were given an added boost from comments from the EU’s Djisselbloem that there may be a way for the UK to have access to the single market. Given the GBP losses have been all sentiment based, this proved to be a significant development worthy of some further redress, and despite the bullish USD tone, we saw Cable rallying through 1.2600 and eventually on to highs 5 ticks shy of 1.2700.  In tandem, we saw EUR/GBP falling through the mid .8400’s taking out support at .8425-30 and .8400, to target .8333 – the low from early May.  GBP/JPY gains were stretched through 145.00, but have since pulled back, along with Cable as the US yields took another step higher.  This gave USD/JPY a fresh surge into the upper 114.00’s, setting up another test on 115.00 as the key 10yr rate looks to print 2.50%.  Thin market conditions are exacerbating moves ahead of tomorrow’s key payrolls release, while equities are also starting to tire a little after its meteoric rise since the US elections.  This could see the cross JPY (and CHF) rates come back a little – already in evidence as we noted in GBP/JPY, but with the commodity currencies under greater risk.  NZD and AUD are looking heavy again after enjoying a brief recovery vs the USD, while against the JPY, they have been riding on the coattails of stocks.  EUR/JPY is also starting to slip a little – Italian referendum jitters kicking in.   CAD is still fighting against the USD tide, with the market now picking up on the follow on effect from US growth.  Nevertheless, steady gains in Oil prices have bolstered to a degree, but into the weekend, we have the Italian referendum to unnerve risk positions in play.  Onto Friday though and all eyes are on the US jobs report.  Today’s weekly claims data was higher than expected, but caused little concern as the Fed will be looking at anything north of 100k to maintain their normalisation process.