MARKET DEVELOPMENT – USD PLUMMETS ON DOVISH FED RHETORIC
USD: The US Dollar is on the backfoot this morning, down 0.7% with bulls caught off-guard by Fed Chair Powell’s rather cautious stance. While the Chair highlighted that the US economy is strong, he did however, mention that the US could face headwinds going into next year regarding slowing demand and fading fiscal stimulus. Recent dovish commentary from Fed’s Clarida and Kaplan who both sees some evidence that the slowing of global economy is becoming a headwind, has seen US yields drop with the 10yr breaking below 3.1%, consequently exacerbating USD losses.
Speculative positioning via CFTC show that US Dollar long positioning is somewhat crowded with bullish bets valued at $30bln (Highest since Jan 2016), suggesting that upside may be somewhat limited. As mentioned earlier, USD bearish views best expressed via USDJPY shorts.
GBP: After yesterday’s turbulent session which saw GBP pounded following a series of high profile resignations. The Pound has regained a firmer footing to climb back above 1.28. PM May’s leadership was given a much-needed boost after Environment Secretary Michael Gove stated that he would not resign. However, pressure remains on Theresa May as no-confidence letters pile into the 1922 committee. While it is publicly known that 23 letters have been sent in, the ERG imply the number is close to the 48 letters needed to call for a no-confidence vote in Theresa May. Talk has circulated that a vote may take place on Tuesday (What happens In a No-Confidence vote)
Data as of 14200GMT
DailyFX Economic Calendar: Friday, November 15, 2018 – North American Releases
DailyFX Webinar Calendar: Friday, November 16, 2018
Four Things Traders are Reading
- “EURUSD Price: ECB Draghi Hints That Uncertainties May Crimp Policy” by Nick Cawley, Market Analyst
- “How Does a Leadership Challenge to a UK Prime Minister Work?”by Justin McQueen, Market Analyst
- “Brexit News: Sterling Remains at Risk of UK Government Breakup” by Nick Cawley, Market Analyst
- “USD Outlook: Signs Growing for a Potential Top Amid Crowded Positioning” by Justin McQueen, Market Analyst