Virtually all major currencies ended the week lower. The sharpest decline against the US dollar was shown by the Australian dollar (-2.26%). Smaller drops were recorded by the New Zealand dollar (-0.99%), the British pound (-0.98%), the euro (-0.98%), the Swiss franc (-0.58%) and the Canadian dollar (-0.51%). Only the Japanese yen registered gains (+0.21%).
EURUSD closed Friday trading 0.05% higher at 1.1713. The pair rose to 1.1746 amid weakness in cable. The latter came under pressure from a remark by UK Prime Minister Boris Johnson that the country should prepare for a no-deal Brexit.
At the recent summit, EU leaders decided to continue trade agreement talks with the UK for a few more weeks. And while the news offset Johnson's warning, the pound still remains under pressure.
EURUSD buyers pair failed to break out of the 1.1743 resistance (45-degree line) and the price action stopped at 1.1746. Ahead of Friday’s close, pullbacks in equity benchmarks and the EURGBP cross pair pushed buyers back to 1.1713.
Today's macro agenda (GMT+3)
15:00 US: Fed Powell speech
15:30 Canada: wholesale sales (August)
15:40 US: ECB Lagarde speech
17:00 US: NAHB housing market index (October)
17:30 Canada: BoC business outlook survey (Q3)
18:45 Fed Clarida speech
19:00 ECB governing council member Weidmann speech
21:20 Fed Bostic speech
22:00 Fed Harker speech
The dollar opened lower in trading on Monday, October 19. There were two reasons for this. First and foremost, House Speaker Nancy Pelosi said on Sunday that she is optimistic and believes a new stimulus bill could be passed before Election Day. In order for this to happen, a deal will need to be clinched within 48 hours.
Secondly, Bloomberg news agency, citing well-informed sources, said that the UK government is ready to revise the controversial provisions of the Internal Market Bill in order to break the Brexit deadlock and strike a trade deal with the UE.
The euro fell to 1.1703 in Asian trading. Notably, China’s Q3 GDP rose 2.7% QoQ (vs. the forecast of +3.3% QoQ, and the previous reading of +11.5% QoQ). In annual terms, the Chinese economy expanded by 4.9% (compared to 5.5% YoY expected, up from the previous reading of +3.2% YoY). Furthermore, in September production and retail sales exceeded the median consensus. In our view, these indicators offset the GDP data that fell short of the market’s expectations.
At the time of writing, the key pair is trading around 1.1752 (the 45-degree line). We think the price action could reach the 1.1758-1.1770 range (67 degrees) on the back of support from the EURBGP cross pair.
A number of central bankers are scheduled to deliver speeches today. At 12:40 GMT, ECB President Christine Lagarde will speak. She gave a lot of speeches last week, so her comments are not likely to exert a strong impact on the euro. In order to see strong growth the interim resistance level of 1.1726 should be breached.