After gapping down against most of its forex peers at the start of the week, the British pound resumed its slide during the London trading session when word broke out that the mayor of London supports a Brexit. This came after reports that UK Prime Minister David Cameron had managed to arrange a deal with the EU that could allow the nation to stay in the union while addressing the pertinent issues.
GBPUSD broke below the 1.4200 area to test the 1.4100 lows, GBPJPY slipped below 160.00 to a low of 158.56, EURGBP found support around the week open of .7800, and GBPCAD broke lower to a low of 1.9265.
UK Inflation Report hearings are scheduled today, although market watchers might still be more focused on Brexit-related headlines, as this uncertainty might wind up dampening demand for the pound for the next few weeks.
EUR also weighed down by weak PMIs
The euro was also in a weak spot, thanks to downbeat flash PMI readings from Germany and France. While the French flash manufacturing PMI managed to beat expectations, the rest of the figures fell short, pushing the region’s flash manufacturing PMI down from 52.3 to 51.0 and the flash services PMI from 55.0 to 55.1.
For today, the German Ifo business climate report is up for release and a drop from 107.3 to 107.0 is eyed, reflecting weaker optimism. Also lined up is a speech by Swiss National Bank head Thomas Jordan who might have some currency jawboning remarks up his sleeve, likely dragging the franc lower as well.
Commodity currencies advance on risk flows
The comdolls took advantage of the pickup in risk appetite and the selloff among European currencies, lifted partly by hopes that the oil producing nations could come up with a deal to cap production and boost prices. According to the International Energy Agency, the market would eventually rebalance itself by next year, as supply levels could be much lower by then.
Meanwhile, the Japanese yen was still unstoppable in its rallies, as the safe-haven currency benefitted from funds flowing out of Europe and into Asia. Fears of a global slowdown stemming from China appear to have taken the back seat for now, especially since market watchers are focused on the Brexit issue and higher odds of ECB easing in March.
Market catalysts for today also include the release of US existing home sales data and its CB consumer confidence index.
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