Separate reports suggested UK PM Theresa May's government is close to a breakthrough on negotiations around the Brexit bill. Cable jumped on the headlines and was the top performer on the day while the euro lagged. Japanese retail sales are due up next. 2nd EURUSD trade has been issued. Tomorrow marks Janet Yellen's final testimony to Congress' joint economic committee. The video for Premium subscribers is posted below, highlighting the existing and future trades.
It was a lively day of trading that included heavy newsflow. The pound suffered early and cable was down more than a cent when a Telegraph report said a deal was largely done that would put the exit bill at 45-55B euros. Cable jumped more than 120 pips then fell back down when a government spokesman denied it. A second report, this time from the FT, added more detail, indicating the deal could be part of a broader deal on the Ireland border and EU citizen's rights. That sent cable near 1.3400 from as low as 1.3220 on the day.
More importantly, it's a fresh catalyst for cable. If confirmed, it's a sign that negotiations are bearing fruit and progressing towards some sort of a deal. At this point, nearly any kind of resolution or progress is good for sterling.
Across the Atlantic, the US dollar was buoyed by economic data as consumer confidence rose to the best level since 2000 and the Richmond Fed hit an all-time high. New home sales also beat expectations, but trade and inventory reports led to downgrades of Q4 growth estimates.
The tax plan also made progress but once again that buoyed stock markets while leaving the US dollar behind. The S&P 500 surged 26 points to a record 2627.
In geopolitical news, North Korea tested a missile but the dip was merely a buying opportunity in USD/JPY and stock markets.
Amidst all that, Fed chair nominee Powell was grilled in his confirmation hearing but most of the time was eaten up trying to score political points on the tax plan. On monetary policy, he did his best Yellen impression and said gradual rate hikes was the best path forward. At the same time, he struck a few dovish notes by warning on low wage inflation and some signs of slack.
Looking ahead, we will continue to monitor the North Korea fallout but also watch for retail sales from Japan at 2350 GMT. The consensus is for a +0.2% m/m rise after a 0.8% m/m jump in Sept. Comments from the BOJ's Nakaso are also due at 0700 GMT.