In a quiet start to the week, there have only been modest movements in currencies. The USD remains out of favour and the commodity currencies have seen modest gains. GBP remains the clear underperformer.
The only major economic release over the past 24 hours was a soft reading for Japan GDP, flat for the quarter against expectations for a small increase. This had little impact on the market, with JPY sitting around 101.20, not far off where it closed last week.
Commodity prices are generally higher overnight, with crude oil tacking on another 2-3% gain, taking WTI to $45.70. The AUD is the best performer of the majors rising 0.4% to 0.7680.
The NZD has nudged its way back above the 0.72 mark and sits at 0.7215. Dairy futures prices have shown further strong gains since the last GDT dairy auction. Expectations are high ahead of the next GDT dairy auction overnight, with another strong gain in prices – possibly as high as 10% for whole milk powder – widely anticipated. There is some technical resistance for the NZD just above the 0.73 mark. It has made three attempts to breach this mark over the last couple of months but has failed to push higher on all occasions.
GBP has moved back below the 1.29 mark and it looks like it’ll soon test the post-Brexit low around 1.28. There were reports over the weekend suggesting that article 50 might not be invoked for another year, pending the outcome of some key elections in Europe. This would extend the period of uncertainty around the UK economy, potentially extending the length of economic recession.
Net short speculative positioning in GBP moved to its highest level ever recorded last week so traders (and in fact many analysts) are expecting that the weakness in GBP is far from over.
EUR remains resilient to the tragedy of the pound and is up slightly against the USD, having tested the 1.12 mark overnight.
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