Euro and pound outperform as potential Brexit deal nears, EU summit today

European majors outperform as both sides inch closer to a Brexit deal, while the Canadian dollar underperforms on a weaker energy underlying.

GBP Source: Bloomberg

EUR/USD: Worsening US retail data and optimistic Brexit news take the pair’s price higher

Final Consumer Price Index (CPI) figures for the Eurozone were a notch below expectations registering a 0.8% reading instead of 0.9% and all but ensuring that the European Central Bank will be able to carry out its easing program without worrying about inflation that has failed to rise towards its target. Out of the US, contracting retail data kept the greenback in relative retreat. And with low-impacting data today out of the bloc, attention will most likely be on the EU summit with regards to any Brexit updates, with both euro and pound moving relatively in tandem on hopes a deal can be reached between both sides. As for sentiment, the rise in the pair’s price has enticed retail longs into closing out and shorts into entering, with retail sentiment shifting from majority long to majority short.

EURUSD Source: IG charts

EURUSD Source: IG charts

GBP/USD: Pair finishes higher as Brexit deal likelihoods rise

Following disappointing employment figures on Tuesday, Wednesday's Consumer Price Index (CPI) figures didn't impress either, failing to rise a notch and with contracting Producer Price Index (PPI) figures. Retail data is up next likely to show another contraction, though as always, the pound is most volatile until Brexit uncertainties are removed or at the very least postponed. UK PM Johnson will be in Brussels for the EU summit as both sides try to finalize a Brexit deal, but then there's the UK parliament's approval to contend with. It’s a bull trend technical overview, but with technicals meaning less in the face of significant fundamental forces, the underlying remains volatile.

GBPUSD Source: IG charts

GBPUSD Source: IG charts

USD/JPY: Dollar retreats on worsening retail data, but yen not that far of

With an absence of Japanese data and an early retracement off the highs, risk appetite has been the determinant for the yen. On the US side, US retail sales contracted yesterday evening which put the greenback in slight retreat later in the session, and more US data will be released this evening including manufacturing, housing, and industrial production. That will be followed by speeches from a few US Federal Open Market Committee members (FOMC). Trade talk is optimistic on the US side, with US President Trump expecting to sign the first phase of the agreement next month even as non-trade related issues between the US and China worsen.

USDJPY Source: IG charts

USDJPY Source: IG charts

USD/CAD: Both relatively underperforming on weak data for the US and an oil price dip hurting CAD

Canadian Consumer Price Index (CPI) figures showed contraction at a worse than expected pace with a -0.4% reading month on month, and failing to take the year on year rate above last month's 1.9%. However, oil prices dipped following a large American Petroleum Institute (API) surplus, and that has a tendency to drag down the energy commodity currency. With worse than expected US retail data, the net result was little change in this pair's price, remaining below the 100-day moving average.

USDCAD Source: IG charts

USDCAD Source: IG charts

AUD/USD: Powering higher on better than expected Australian employment figures

Another day, but not another consecutive decline for the commodity currency, as its price managed to recover off of yesterday’s lows thanks to worse than expected US data, and powering higher this morning due to better than expected Australian employment figures that showed its unemployment rate drop a notch to 5.2%. Its weekly bear trend channel remains in place, but on the daily outlook the negative technical bias is less visible as most of its technical indicators remain neutral. The upside movement has offered a chance for retail longs to take profit, and as a result the bias has dropped 3% but still remains heavy long at 68%, an exact opposite of institutional bias at a heavy short 68%.

AUDUSD Source: IG charts


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