The wires are ablaze with news that a Brexit deal is now done, citing UK sources close to Number 10. There will no doubt be much crossing of the ‘t’s and dotting of the ‘i’s with plenty of other observers still maintaining caution. But it seems the next 24 hours could see an agreement with the Brexit Christmas pantomime officially closing this week.
The Pound rallies
Sterling is not holding back and is up 1.3% on the day versus the Dollar with EURGBP off 0.8. Cable topped 1.3570 today with the ‘hotline’ between UK PM Johnson and EU Commission President von der Leyen in full (fisheries) effect. An intensified phase of talks has ultimately brought us to the final curtain, though what type of deal is hatched will be scrutinised with talks around the fine detail still needed.
GBPUSD has manged to maintain the bullish channel from the lows hit in mid-September. A series of higher highs and higher lows saw the major touch a two-year top last week above $1.36 before spiking lower on Monday. But the sharp intraday pullback was encouraging for bulls and they will now try to get beyond 1.3624 on a relief rally if and once any agreement is confirmed. EURGBP is more messy with prices needing to drop below last month’s lows at 0.8861 to see deeper downside.
Risk moods softens
Elsewhere, the Dollar is easing and consolidating once more just above its recent lows. Trade volumes are low as we enter the holiday period, although we got a last US data dump of the year this afternoon. The weekly jobless numbers were better than expected but still elevated above 800k, while the durable goods report was much stronger than it first appeared, with big revisions and shipments potentially leading to GDP revisions going forward.
The possible ‘inverted hammer’ candlestick in the DXY printed on Monday, which would be a trend-reversal signal, is not playing out as such just yet. Prices haven’t managed to trade above Monday’s high around 91.02 which would see the signal confirmed. Yesterday’s ‘inside day’ indicates consolidation and the long-term trend as we know is definitely down!
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