Thursday is one of the more rare days in the financial markets of late, where the Dollar happens to be trading lower against its G-10 counterparts. The sell-off in the USD has encouraged all but the Canadian Dollar and Japanese Yen in the G-10 space to appreciate by at least 0.50%, while the likes of the Swedish Krona, British Pound, Australian Dollar and New Zealand Dollar have all risen by more than 1%.
Source : Bloomberg Terminal
The catalyst behind the sudden fall in the Dollar is unclear, although I would side with the view that it is probably a technical correction that has sparked this move after the Dollar Index hit its highest level in over a year on Wednesday.
Friday is NFP day, where traders should be aware that the US employment report has the potential to encourage further movement in the global currency markets. The Dollar can recover its momentum if the employment report shows even stronger divergence between the US economy compared to its developed counterparts, although I would personally remain cautious with the USD just days before the mid-term elections on November 6.
Another reason that might be behind the sudden reversal in momentum for the USD is the headlines about President Trump saying that trade talks with China are “going well”. At time of writing, Trump is scheduled to meet Chinese authorities in a few weeks, with the potential outlook of a breakthrough in prolonged trade tensions representing a significant opportunity for financial markets to further unwind USD positions.
Elsewhere, one of the largest moves in terms of currency pairs is the British Pound, after the GBPUSD jumped 200 pips following reports of a potential Brexit breakthrough for UK Prime Minister Theresa May. Optimism over a Brexit deal being close is hardly something we have not heard countless times in recent months, so I would prefer to believe it when I really see it when it comes to a possible Brexit deal.
1.30 in the GBPUSD has been used as a psychological level for Pound traders for a long time. I would keep an eye on whether the GBPUSD manages to conclude above 1.30 today, because this is the potential signal that Pound buyers may need to feel encouraged about a further advance in GBPUSD.
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