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Dean's Daily FX Update – 09 June 2017
In the Zone
- AUDUSD
- NZDUSD
- USDJPY
Noteworthy News
- There are already rumours surfacing that we may not see a Brexit unfold after all, at the very least there will have to be a delay in these proceedings. This is a story line that may be worth monitoring.
Recap
Yesterday was supposed to be the big day – “Super Thursday,” as the media had coined it. The powers that be tried to limit volatility as much as possible and for the most part had succeeded with the early leak of the Draghi intentions as well as the opening testimony of former FBI director Comey on Wednesday.
The ECB speech came and went and predictably Draghi raised growth but at the same time he lowered inflation estimated for the next 3 years, with all being below 2.0%. He also suggested that Quantitative Easing would continue into December of this year and that we could expect rates on hold for the foreseeable future. The ECB is clearly not in a rush, the initial reaction was for the EUR to weaken, but it was somewhat contained.
The Comey testimony was a little bit of a dud if I have to be honest and in my opinion Comey came across as a disgruntled employee. President Trump’s attorney has already started the counter but from my viewpoint this is going to be trivial as there is no smoking gun and anything that Trump may or may not have implied is up for interpretation. It was confirmed that Trump was never under investigation and so I suspect that this may blow over. The most amazing part of this testimony yesterday is that we did not see a single tweet from President Trump, perhaps someone has whispered a word in his ear.
There was always going to be volatility leading in the UK election, but of the three big events yesterday, this one seemed to have the most predictable outcome. The Conservative Party were supposed to win a majority in parliament and so the negotiation around Brexit would begin, the exit polls showed that although the Conservatives would win the majority of seats – it would not be enough to govern, in fact they lost seats.
The GBPUSD responded by gapping lower by 150 pips, the results are not completely finalized but we do know that we will have a “hung parliament.” And now we go back into a situation whereby we have a coalition government. This will naturally lead to a post mortem which may result in PM May losing her position, there is going to be a period of uncertainty for the UK and questions will of course be raised over the management of Brexit – that is assuming we will still have an exit.
There is bound to be a little position movement today and so for that reason we have not included daily ranges. Technical details are in the morning video though and we will revert to the full programme on Monday.
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