While the Brexit headlines have cooled off, it’s an ECB rate decision that would get the FX market’s attention first up. But even before that, we had some conflicting data out of Europe with mixed PMI’s from France and Germany.

The French numbers were particularly strong, enough to see EURUSD spike from 1.1130 to 1.1162. 15 minutes later, the German numbers would be particularly weak and back we came to 1.1130 – blink and you missed it.

GBP got an early boost from the only meaningful Brexit headline of the day with the new European Commission President-elect stating that a Brexit extension looks ‘very good’. GBPUSD rallies towards 1.2950 but without any details on the length of the extension, is back under 1.2900 in short order.

The US day begins with equity futures showing some mild gains, despite Twitter announcing some poor results. But it’s the ECB rate announcement first up.

EUR sits at 1.1130, USDJPY at 108.65 and GBPUSD at 1.2890. As expected, there are no changes in ECB rates. But as is often the case with central bank rate announcements, it’s more about what they say than what they do.

Nothing major from the news conference. Draghi reaffirms that downside risks are prominent, and inflation muted. A standard line from Mario. He also reiterates that today’s decision was unanimous. This takes EURUSD briefly back to 1.1150 and EURJPY up to 121.10. GBP follows along with trading to 1.2920 before falling away quickly to 1.2890 once more.

Amid all this, we had weak US Durable Goods data, with the headline number down 1.1%. Not too much reaction to this but USDJPY trades a couple of spreads lower.

US equities opened higher on the back of European equities and strong earnings from Microsoft and Tesla. Then the DJ drops 100 points, but the Nasdaq remains +43 points.

Gold spikes up to 1503. Then some US data, Manufacturing PMI. Better-than-expected and the USD gets a boost.

EURUSD is down to 1.1110 and GBP down to 1.2850. The only one not benefitting is USDJPY as traders sell JPY crosses with equities coming off.

Next up a headline that UK PM Boris Johnson is looking for a December General Election. For some reason, this has the market hitting bids in GBP as we trade down to 1.2790.

This is enough to take some weak stops out in EURUSD as we hit a low of 1.1093. However, it’s not long before GBP is back to 1.2850 although EURUSD struggled to rally much above 1.1105.

As we head to the close, equities close mixed with the DJ down 28 points but the Nasdaq up 66. A day for the USD bulls.

A choppy day of trading with the USD the main beneficiary. However, it was GBP that once again showed the greatest volatility.

And because of that volatility, GBP is as a tough trade right now, especially as it reacts to every Brexit-related headline.

Looking at the hourly chart attached you can see we have made several attempts just above 1.3000 and have repeatedly failed.

Thursday’s high only managed 1.2950. Obviously, we are still at the mercy Brexit developments as well as potentially a general election.

But a move below the day’s low in the 1.2785-90 window (which has now formed a double bottom) might potentially see an acceleration in the sell-off.

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David Hannigan

A graduate of the Cass Business School, Dave's career began with Credit Suisse as an Equity Options Trader on the London Stock Exchange, before moving into the world of FX with Chemical Bank and Citibank. 1994 saw him join National Australia Bank, first as a Senior Dealer, then Senior Vice President and Chief Dealer.

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