Daily Market Update

Sterling Lower as may Faces Lack of Support

October 22, 2018

The greenback opens the week modestly stronger against most of its counterparts, holding on to the strongest part of recent ranges.


The Bloomberg Dollar Index is near a two-week high. “Risk-on” is the prevailing sentiment across markets overnight. The Shanghai Composite rose 4.1%, its largest daily gain in two and a half years, kick-starting a global rally. European equities ticked higher and American futures point to a higher open, diminishing demand for the Japanese yen.

President Trump surprised many, even within his own party, by promising a middle class tax cut only two weeks before the mid-term elections while at a rally in Nevada. The President will travel to Texas later this week to help former rival Senator Ted Cruz in his re-election efforts. We will be watching to see if the President again promises a tax cut or if he was perhaps riffing at the rally over the weekend.

The economic docket is light with only the Chicago Fed crossing the wire and unlikely to move markets. Durable goods on Thursday and GDP on Friday are the biggest risk events on the week’s calendar. The Bank of Canada is expected to raise rates on Wednesday and the European Central Bank meets on Thursday.


The Euro initially popped higher to start the week overnight following the news late Friday that Moody’s gave Italy a “stable” outlook for their sovereign bonds. Italian assets initially surged but have since cooled, driving the Euro lower.

With little in the way of fundamental data, EUR/USD may find choppy ranges ahead of the European Central Bank’s meeting on Thursday. It is expected that the central bank will provide confirmation that its asset purchase program will wind down by December.


The British pound slipped nearly half a percent against the U.S. dollar in early trading as Prime Minister Theresa May’s position may be in doubt. The Sunday Telegraph reported that as many as 46 conservative lawmakers have demanded a leadership contest, which is just two short of the threshold needed to trigger a vote. May will give a speech to Parliament at 10:30 Eastern time to give an update on the progress made in the Brexit talks.

Meanwhile, some 700K people marched in London over the weekend demanding a “peoples’ vote” on the Brexit terms before they are ratified.


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