The dollar index is now on the back foot this morning after earlier strength that saw most dollar pairs gap lower at the open. China trade tensions and Brexit uncertainty are driving much of this move.
The AUD/USD has made its morning gap lower and is now higher for the morning.
The EUR/USD is setting up for another strong day, making it four straight days of gains. By contrast the GBP/USD is only just positive after a more severe gap lower. The November lows remain within reach as Tuesday’s Brexit vote weighs heavily on the pound. As a result, the EUR/GBP has reached its highest levels since September.
Canadian dollar continues to benefit from the weaker US dollar, driving the USD/CAD lower for the second straight day after Friday’s impressive jobs numbers.
The USD/CHF is also suffering as the Swiss franc continues to find buyers amid the trade tensions. The USD/CHF is down for the sixth straight day.
The USD/JPY has gapped lower at the open as money flows into the safer harbour of the yen. The pair is testing its lowest levels since November.
Today, we have UK GDP and manufacturing production at 09.30.
BOC Governing council member Lane is speaks 12.45.
The main question right now is whether a vote failure fallout is already priced into the pound. A failure of parliament to back May’s plan isn’t the end of negotiations, but it does ratchet up the uncertainty levels. The GBP/USD has underperformed of late, but not dramatically so, leaving the question as to whether the downside risk has not been fully appreciated.
The market has historically shown a capacity of overreaction, making a ONE TOUCH trade attractive.