Sterling crashes 6% overnight

Yesterday’s markets

7th October 2016

  • EUR German Factory Orders m/m: 1.0%
  • EUR ECB Monetary Policy Meeting Accounts
  • USD Unemployment Claims: 249K

Sterling’s bearish tone continued yesterday as it broke through a number of key psychological levels and posted a multi decade low. Markets are sighting French President Hollande’s ‘hard Brexit’ comments, while reports of a fat finger error, which drove the algo-trades hay-wire also collaborated to the collapse in the Pound during the Asian trading hours. GBPUSD has retraced somewhat and is now trading at levels last seen in the mid 1980’s. This week’s Tory party conference has been the catalyst behind Sterling’s fall from grace as PM Theresa May and BoE Governor Broadbent also pushed a ‘hard’ Brexit.

In other news, Deutsche Bank’s problems continue as the bank awaits to face legal problems outside the Department of Justice fine. Deutsche have an indictment for colluding with Banca Monte dei Paschi di Siena SpA to conceal the Italian lender’s losses. Although Deutsche’s share price is up as much as 25% from Friday’s low and the company have made large cuts in its workforce, legal costs remain a large issue for the company, an issue which is spooking many investors.

Yesterday’s economic docket was relatively light, with only one piece of data released; US unemployment claims registered a better than expected 249k, a six month high.

Today’s markets

6th October 2016

  • GBP Halifax HPI m/m
  • GBP Manufacturing Production m/m
  • GBP Goods Trade Balance
  • USD Average Hourly Earnings m/m
  • USD Non-Farm Employment Change
  • USD Unemployment Rate
  • USD FOMC Members speak

This week ends with a bang, with significant data releases. Firstly, the UK will post industrial and manufacturing production along with the UK balance of trade.  These figures are expected to show minor increases which are unlikely to show a great deal of support for a currently struggling Pound.  The biggest data release of the day is the US non-farm payrolls, which will no doubt lead to some short term volatility, with expectations of a bounce from last month’s 151k reading towards 170k.  We will also see the participation rate and average hourly earnings add to the employment picture, whilst a number of Fed speakers will lend their view on what these employment numbers mean for rate hikes.