MARKET DEVELOPMENT – GBPUSD[1] Slides Through Support, Chinese Yuan Freefall to Spark Intervention
DailyFX Q2 2019 FX Trading Forecasts [2]
GBP: Unsurprisingly, cross party talks between the government and Labour party have collapsed. However, this did push GBP[3] to session lows, having a made a break below support at 1.2770 (noted Wednesday[4]), while GBPJPY[5] tripped through 140.00. While the pressure is continuing to rise for PM May to offer her resignation, the risk is who will replace her. A hard Brexiteer could see GBP drop even lower, which places 1.2670 in sight. As a reminder, Boris Johnson is leading in the betting markets to replace PM May.
CNY/CNH: Since President Trump escalated trade war tensions, the Chinese Yuan has been in freefall with the currency now eyeing a move towards the November 2018 peak (6.98). However, focus is on the psychological floating peg at the 7.00, whereby any attempt to push through could spark a bout of FX intervention. Of note, source reports stated that the PBoC will not let USDCNY go above 7.00.
AUD[6] / CAD: As the US-China trade tensions continue to hold its grip on markets, the high beta Aussie has been on the defensive yet again. Elsewhere, the Canadian Dollar[7] has failed to be lifted by the pick up in oil[8] prices with wider US/CA bonds spreads weighing on the currency, alongside the drop in the Yuan.
Source: DailyFX, Thomson Reuters
