The markets reacted as they do when it was reported that Teresa May favours a hard Brexit and is willing to forego the existing Europe/UK trade agreements.
The pound took a hit of course and, when the markets opened, Cable and the pound crosses opened with a weekend gap to the downside and EURGBP opened with a corresponding gap to the upside.
News Sentiment is very bearish on Cable and GBPJPY and many analysts are predicting further pound weakness.
Correspondingly, News Sentiment is Bullish on EURGBP.
If we back out and look at the big picture on GBPUSD we can see that we are still in uncharted territory as far as a cheap Pound goes. Just to put things into perspective; this was the collapse of Lehmann Brothers in 2008 and here we have Brexit.
So, later today the Governor of the Bank of England, Mark Carney, will be speaking and we may see some volatility as the markets will expect some rhetoric from him to counteract the current Pound weakness.
Also, tomorrow from London, we have yearly Consumer Price Index data out and the anxiously awaited speech from Teresa May regarding Brexit.
Wednesday we have Earnings and Employment data out and Retail Sales news on Friday so we can expect a bumpy ride for the Pound this week.
One of the biggest Pound weekend gaps was found on the GBPCAD chart. Looking at this and at USDCAD, we see that News Sentiment is quite Bearish on both indicating future Loonie strength.
But watch out for news this week starting with Wednesday’s Interest Rate Decision, Thursday’s Manufacturing Sales report and Crude Oil Inventories. We finish the week in Ottawa with monthly CPI and Retail Sales data.
We have a bit of news this week from down under with tomorrow’s New Zealand Dairy Price Index and Thursday’s Australian Employment figures.
News Sentiment is quite Bearish on AUDUSD today and we have been in a consolidation pattern for several days. We will keep an eye on this one.
If you are a regular follower you will know that we like the correlation between the Aussie Dollar and Copper. The metal has also been consolidating over the last few days but News Sentiment is showing neutral right now and we need to keep an eye on this.
News Sentiment is showing Kiwi weakness after several days of consolidation against the Dollar and the Euro.
Looking at the USD Majors News Sentiment is quite extreme in it’s views right now showing Dollar strength against the Pound, Aussie and Kiwi but weakness against the Yen, Euro and CAD.
Wednesday, we have CPI figures from Washington followed by a speech from Janet Yellen about US Monetary Policy. Thursday watch out for data on Building Permits, Manufacturing and Unemployment Claims and another speech by Janet Yellen Friday.
To wrap it up we have mixed News Sentiment on the Euro and it’s crosses but watch out for an interest rate decision and press conference Thursday.