- USD/JPYbears take control and bust down below the 200-hour MA.
- It was Brexit stealing the show overnight, weighing on US yields and risk.
USD/JPY has been grinding slightly lower from 108.60 to 108.45 prior to the open in Tokyo but there has been a burst of energy from the bears with Yen picking up a bid across the board. USD/JPY is currently trading down -0.13% at the time of writing having travelled from a high of 108.51 to a low of 108.25.
From a fundamental basis, it was Brexit stealing the show once again overnight and trade-war and Middle East war headlines were taking a backseat to the commotion in the UK Parliament.
“The quick take is that PM Johnson’s bill won parliamentary support in principle but the government’s timetable of just 3 days debate on the bill was rejected. Johnson will now meet once more with EU leaders to discuss the timetable and an early election is increasingly likely, but with Brexit delayed beyond the election. Key for markets is that a no-deal Brexit remains unlikely,” analysts at Westpac explained.
In the aftermath of all of that, EU’s Tusk announced that he will recommend the EU accept a UK request for an extension out to January 31 2020. While a no-deal Brexit remains unlikely, UK politics, is as ever, up in the air and likely to keep risk at bay. However, on evidence compounds that a no deal Brexit is off the table, a relief in markets should be seen through a rally in the Pound and a softer Yen.
US data and US yields in focus
As for data overnight, in the US, the Oct Richmond Fed manufacturing survey rose firmly to +8 (est. -7, prior -9). “Gains were broad-based with noted lifts in employment and new orders with expectations edging higher in addition to stronger current conditions. US Sep existing home sales slid -2.2%m/m (est. -0.7%m/m). However, at 5.38mn (est. 5.45mn) the annualised level remains close to post record highs and NAR’s chief economist continues to cite a shortage of stock/supply,” the analysts at Westpac explained.
US 2-year Treasury yields were moving between 1.59% and 1.63 while the 10-year yield travelled between 1.76% and 1.80%. “Markets are pricing 22bp of easing at the 30 October meeting and a terminal rate of 1.24% (vs 1.88% currently),” the analysts at Westpac noted.
USD/JPY levels
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