EURUSD at 4-month lows after QE tapering

EURUSD at 4-month lows after Draghi reveals that the ECB did not discuss tapering QE

GBP stabilizes in response to a legal challenge on the use of Royal Prerogative to trigger Article 50

Several events this week likely to keep Brexit implications in focus

Last week ended with EURUSD making 4-month lows breaking the key 1.0900 level after ECB President Draghi informed markets that the ECB had not discussed tapering of Quantitative Easing. This is against a backdrop of broadly positive US data and the continued likelihood of a Trump victory being priced out of the US election

GBP performance continued to be dominated by concern over the UK’s relationship with the EU, but stabilized somewhat last week in response to a legal challenge on the use of Royal Prerogative to trigger Article 50. If successful, this may increase the probability of a delay in the triggering and result in a more moderate negotiating stance from the UK

Barclays Research, however, thinks “…that the UK will leave the EU and continue to think that the GBP’s eventual recovery will be moderate…” Against a backdrop of soft and hard data up to September, they expect “…the BoE to maintain rates at 0.25% in November and cut in February 2017 to 5bp. [They] also expect the MPC to confirm QE as it stands but do not anticipate any insights into whether the MPC would support extending sovereign QE beyond March 2017…”

Elsewhere, Barclays Research no longer expect further BoJ easing at the next MPM meeting on 31 October/1 November but instead expect the BoJ to be on hold until mid-2017

Several events this week is likely to keep Brexit implications in focus starting with UK CBI trends data at 11.00. Later this afternoon we have a run of Fed members scheduled to speak including Fed President Dudley, Bullard, Evans and Powell

What to Watch for Today

At 11.00 this morning we get UK CBI industrials trends data (Consensus: -5 total orders) followed by a run of Fed speakers including NY Fed Dudley (FOMC voter) at 14.00, St. Louis Fed Bullard (FOMC voter) at 14.05, Chicago Fed Evans (FOMC non-voter) at 18.30 and Fed Powell (FOMC voter) this evening at 19.00

In the week ahead we look to speeches by ECB President Draghi and Mark Carney (Tuesday), followed David Jones, the Minister of State for Brexit, who will testify to a select committee on EU-UK relations in preparation for Brexit (Wednesday). Later in the week we look to the UK GDP preliminary data (Thursday) and the US Q3 Final GDP release (Friday)