More pain for the Pound?

Stephen Innes SPI Asset Management

It appears UK Prime Minister Johnson is swearing to make the annoying Brexit saga an open-ended book affair.

The big news of the session is PM Johnson will introduce a clause in the Withdrawal Agreement Bill that will block an extension to the Brexit transition period. The headline sent shivers down the spine to those who believed that the PM would use his significant majority and shift to a more harmonious relationship with the EU.

GBPUSD opened around 1.3330/40, but moved quickly below 1.3300, with pain kicking in. It eventually buckled to low as 1.3236 before reverting to 1.3300. Still, selling pressure has remained as focus shifts back to the increasing prospects of a hard or a cliff-edge Brexit to which the odds have gone up considerably after this morning’s headlines

Bank of England is not expected to make any change in policy at the MPC. Still, with a long and likely arduous 11-month transition period likely too short of finalizing a new trade agreement, Brexit-related uncertainty will likely return. So, it's essential to keep an eye on the BoE splits for policy forward guidance. Saunders and Haskel dissented in November. There's a tail risk of an even more full split vote with Vlieghe (sounded Uber dovish in summer) maybe join the doves.

Gold

Despite heightened risks around Brexit, Gold struggled to make significant top side traction today in the face of a stronger Greenback and the surprising risk-on sentiment in stock markets. Indeed, not the best of bedfellows for gold market concerns. But Brexit risk is just starting to build, so there could be more demand for gold during the UK session as it appears UK Prime Minister Johnson is swearing to make the annoying Brexit saga an open-ended book affair.

Oil

The new OPEC+ agreement earlier this month and the preliminary US-China phase one trade agreement (due to be signed in January) are helping to maintain positive sentiment for oil. Still, the absence of macro catalysts oil bulls are vulnerable to Brexit and Trade news flow, and inventory report position squeezes.

Currency Market Warp

Asia session flows were EURUSD and GBPUSD selling, as well as EURGBP buying - so net GBP selling Indeed there was a lot of GBP action in Asia today, and it looks like the market is still positioned very long GBP from last week. Liquidity could be blamed in Asia for the extreme move. But heading into year-end, I wouldn't be surprised to see more of the same even in the more liquid UK and US sessions.

There, was a small net selling bias in USDJPY too.

In Asia FX space, markets have been sprinkled by net buyers of USD vs. KRW, HKD, TWD, and SGD. Overall, sentiment in FX is a bit risk-off as USD haven appeal was triggered early in the session due to the Brexit brouhaha.

The RBA minutes breathed some life into AUD rates, to all appearances firming up February for a reassessment and a potential cut saying it's essential to reassess the economic outlook in February 2020. The market added 3bp to its pricing of RBA cuts in February, to a total 14bp.

USDCNH quietly consolidated around 6.9950 with light interest this morning with nary a peep

Taking is a cue from the Yuan, the Ringgit traded quietly confined to narrow ranges ahead of this week’s inflation data

USDTHB broke through 30.25 and remained very well bid compared with the rest of USD/Asia the forward points are moving with spot, suggesting outright buying and as a similar theme is unfolding THB crosses, where the market is taking long THB off the table into year-end

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

AUD/USD bounces back toward 0.6950 on fresh USD supply

AUD/USD bounces back toward 0.6950 in the Asian session on Friday. The US Dollar retreats from 17-month highs as traders take profits off the table ahead of the all-important US Nonfarm Payrolls report. Meanwhile, the Australian Dollar draws support from reviving expectations of a November interest rate hike amid elevated global yields and inflation risks.

USD/JPY struggles near 158.00 as USD retreats ahead of NFP

USD/JPY is struggling for fresh impetus near 158.00, moving away from the top end of its weekly range in the Asian session on Friday, after hotter-than-expected Tokyo CPI and amid a broad US Dollar retreat. Traders reposition themselves ahead of US Nonfarm Payrolls.

Gold fades the earlier optimism; back below $4,200

Gold could not sustain the post-NFP bull run past the $4,200 mark per troy ounce, receding toward the $4,180 region at the end of the week. The precious metal’s inconclusive price action comes amid fresh selling pressure hurting the US Dollar as investors assess the latest NFP data.

Week ahead: Fed minutes in the spotlight amid bond market rout

The first full week of October and the final quarter of the year get underway with little fanfare in terms of the economic agenda. But far from being short on excitement, the coming week will test market nerves, as government bond yields continue to soar on growing worries that the energy crisis will only get worse, fuelling inflation.

CFTC Report: Speculators turn more defensive as Oil exposure falls

The week in one sentence: During the week leading up to September 29, long positions in crude oil were significantly reduced, while short positions in the Canadian Dollar went up. In addition, the positioning of the Australian Dollar and the Japanese Yen declined, while Coffee buying stood out against a more general background of defensiveness.

The Euro is near a one-year low: Inflation could trigger its rebound, not its fall

EUR/USD has fallen to its lowest level since May 2025. The pair hit 1.1312 on Wednesday and trades well below the January peak of 1.2082. The decline reflects a powerful combination of US Dollar strength, geopolitical uncertainty and renewed concerns about Europe's exposure to higher energy prices.