Morning Brief – Friday 23rd

Brace, Brace:

As Thanksgiving gives way to Black Friday, markets have been particularly thin, allowing for considerable volatility within the world’s major currency pairs. The considerable swings in the US Dollar this afternoon could have been a result of limited US trade today, constraining the available supply of US Dollars, however, is more likely to represent traders’ anxiety moving into the weekend. Today, President Trump has met with his Chinese counterpart, President Xi Jinping at the G20 summit in Argentina. As the two respective leaders of the two trading Leviathan’s meet, global markets have braced. Given the escalating trade tensions between China and the United States as the presidency of the controversial Mr Trump has evolved, markets are fully aware that a lack of cooperation between the two countries could result in further tariffs, constraining already waning global growth. Given the Dollar’s position as the world’s largest reserve currency and ultimate safehaven, investors have flocked to it in droves for security.  At the European close this afternoon, the Dollar had gained one quarter of one percent on a trade weighted basis. Despite the Dollar’s appreciation, cable has defended a 1.28 resistance level, however, the Dollar has continued its advance through the 1.13s against the Euro. With the Prime Minister of the United Kingdom, Theresa May, meeting her European counterparts in Brussels this weekend, considerable risk has been priced into the Pound and the European single currency. Losing a comparable 0.1% on a trade weighted basis throughout the day, with the Euro being hampered further by weak German PMI data this morning, investors appear unsure of what this weekend will bring for Brexit. Part of the leaked document yesterday has already allowed the Pound to gain back considerable ground. However, should a lack of resolution be found with European counterparts, particularly surrounding the Spanish objection to the Gibraltar compromise, there could be far more downside within Sterling. The ever-increasing correlation between the Pound and the Euro under changes in the outlook for a post-Brexit trade deal necessarily suggests that any fall out within GBPEUR will be limited over the weekend.

Today’s Global Market:

Discussion and Analysis by Charles Porter

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