The British pound has staged a massive rally and got back above the 1.32 figure. GBPUSD has reached mid-July highs around 1.3290 amid a weaker dollar and signs of progress in Brexit process. In has been reported that a special summit will be held in Brussels on 17-18 November to secure an agreement on the UK's withdrawal from the EU. Earlier in the day, EU leaders have broadly welcomed PM May’s proposals, but hinted that they want another proposal on the Irish border problem. The additional support for the cable came from the economic front. August retail sales came in above expectations, while the previous results were upgraded, which painted a rather positive picture. However, as the recent spike was too aggressive and emotional, there I a risk of a partial profit-taking in the short term, while a daily close above 1.32 will confirm the bullish breakthrough.
USDJPY is dragging lower for a second day in a row, but the rate of decline is limited as traders are reluctant to buy the yen in a risk-on environment. The price keeps marginally above the 112.00 threshold and remains positive in the weekly charts despite the general dollar weakness. The potential for a deeper decline from the current levels is limited at this stage. Moreover, the pair could resume the rise should the market sentiment worsen at the end of the week.
Brent crude turned negative over the last hour as the market has reacted to another intervention from Trump who reiterated his disapproval of OPEC wanting higher oil prices. As a result, priced declined by 100 pips within an hour and turned negative on the day. The barrel has found a local bottom at $78.30 and is now making recovery attempts. Meanwhile, the chance that OPEC+ will agree further increase in oil output in Algiers this weekend is dwindling as Iran has been against that, fearing that they will lose the market share permanently. In a broader picture, the market sentiment remains quite robust despite the current retreat as the expectations of Iranian sanctions coupled with weaker dollar and risk-on environment continue to keep prices afloat.
Nathan Lambert, Head of Global FX Analytical Department