IFX Market Report: Monday 7th October 2019

The pound fell on Friday as further doubts crept in of a viable withdrawal agreement between the UK and EU. The pound fell 0.3% against the dollar and 0.5% against the euro. The proposal is for Northern Ireland to remain a part of the EU’s Single Market to replace the need for the backstop. Although there might be support for this in Parliament, the EU has largely rejected the proposals as infeasible.

Implied volatility gauges remain high as investors still predict large swings for the pound, highly reactive to any implications around the UK’s chances of leaving the EU with an agreement. For the moment the UK will either leave the EU on the 31st of October or the exit date will be delayed to January 2020.

GBPUSD opened at 1.2338 and fell to an afternoon low of 1.2283 before recovering later to close at 1.2329

GBPEUR opened at 1.1242 and hit a late afternoon low of 1.1194 before closing 1.1229

The dollar fell again on Friday, ceding earlier gains made from a jobs report that performed only slightly lower than expected. Investors remain worried about political risk created from ongoing trade talks with the US and China. The dollar fell against the Japanese yen to make it 1% down for the week, which also contributed to the slight drop in the dollar index.

The impeachment inquiry into President Donald Trump continues with a second whistle blower emerging over the weekend to complicate matters. Though these proceedings seem unlikely to yield any substantial action they are not helping investors’ nerves.

Elsewhere, the euro gained 0.1% against the dollar.

EURUSD opened at 1.0902 gained steadily across the day, closing at 1.0985

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