FX markets are ending the week on a whimper rather than a bang, with the Dollar broadly steady in trade-weighted terms for the fifth consecutive session. The Euro, Swiss Franc and Kiwi Dollar are marginally weaker versus the Dollar while the Australian Dollar is marginally stronger. The GBP/USD cross is broadly unchanged around 1.283.
Markets have admittedly had little tier one macro data to work with. Today’s only major release was the German IFO business climate index which was unchanged in October from September at 94.6. More fundamentally, markets are awaiting tangible developments in the ongoing US-China trade war and on the Brexit front. The EU has agreed to delay Article 50 negotiations beyond 31st October but will only specify next week the length of the delay. The British Parliament is due to vote on Monday on whether to hold an early general election (which could possibly take place in mid-December) but it remains unclear whether two-thirds of MPs will vote in favour of bringing forward early elections currently due in May 2022. Finally, the Federal Reserve will next week – on 30th October – hold its policy meeting. Analysts forecast a 25bp rate cut (the third this year) and markets are pricing in 20bp of cuts so barring any surprises the focus will be on whether the Federal Reserve has any appetite for a fourth rate cut before year-end. Next week could prove critical for currency markets which have in recent days been treading water.
