Market Research

The political circumstances in UK continues to keep a limit on any rally of the sterling. Main focus is on the leadership race of course. Boris Johnson reiterated his plans for Brexit: to leave the European Union by October 31 — with or without a deal. Johnson further added that the Brexit deal is almost dead and it would be strange if the EU decides to impose tariffs on UK goods. These comments added to expectations of a no-deal Brexit and basically spook speculators away from aggressive bullish trades.

EUR/USD pair is trading at three-month high yet it failed to break above 1.1400 and towards the end of Monday’s US session it has been in a small consolidating range between 1.1395 and 1.1385. It is the fourth day of rally which is fueled mainly by broad dollar weakness that was triggered by expectations about a rate cut from the Federal Reserve. Also, improvement in EZ economic data added to the recent bullish move.

Asian equities did not follow the course of all-time high recorded by S&P 500 yesterday. Perhaps, Trumps’ threats towards Iran is a reason and markets afraid of more serious follow-up during a weekend. So beware of open positions overnight. Perhaps it is also due to profit taking following a good week of gains.

After yesterday’s Fe’s announcement to leave rates unchanged, AUD/USD got bullish momentum soaring towards 0.6900. Yet this morning AUD/USD has stalled and actually did not move in response to dovish comments by RBA's Lowe. The central banker said it is not unrealistic to expect a further reduction in interest rates as there is considerable spare capacity in the labor market despite strong jobs growth. Lowe also stressed the need for a fiscal boost and structural reforms.

Uncertainty seems to fade away yesterday and this morning as stock markets in Asia took the impulse further from yesterday’s European and US sessions. Yesterday’s late evening significant rally took place after Draghi's very dovish comments and in addition there were positive developments of US-China trade issue and it all means one thing for stock-up.