The parapet
With high US yields and strong US data publications, it is not the time for currencies to stick their head above the parapet. Unfortunately for GBP, the attention that the Prime Minister is drawing to himself, and the conservative party conference, runs the risk of highlighting the political risk associated with GBP. With the current parliament certain to be dissolved in December 2024, the latest a UK general election could take place is Jan 2025. Is it highly common for an incumbent government to call the sovereign to dissolve parliament early if they see the political climate in their favour. Therefore, with attention being drawn to UK politics, markets could prejudice GBP in the knowledge that an election could be looming just around the corner. Whilst the debate surrounding the scrapping of HS2 should be a regional or national political concern at best, it sends the wrong signal for risk averse FX and fixed income markets.
Towards the end of last week, we did observe an encouraging reprieve from the relentless drive higher in US yields and the Dollar. As a result of the reprieve, the jury was out on whether the fractionally green candle sticks on the EURUSD chart in the last couple of trading days in September were just month end rebalancing flows or the reversal of the dominant near three-month trend in markets. Based upon trading patterns so far this week, it appears that any buying back of Treasuries and selling of the US Dollar at the end of September was as a result of month/quarter-end flows only.
It is no surprise that we are rapidly approaching key support levels within GBPUSD and EURUSD in particular. USDJPY, a pairing that continues to be punished with the Yen having declined by in excess of 17% year to date, has less visible resistance ahead. The lack of resistance in USDJPY until the highs of October ’22 are reached could encourage further US Dollar buying to extend bullish Dollar demand. Any reprieve to EURUSD swap points, a key driver of short term EURUSD spot pricing, during the month/quarter-end flows have also been closed offering more room for EURUSD to fall.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Gold and Silver
Humphrey Percy
Wed 4 Feb 2026
Gold and Silver Due to the vertiginous moves in both these precious metals all markets are more than usually fixated on the price action at present. Yesterday, both steadied and clawed back some of the recent losses with Gold rising almost 6% and Silver 10% to USD 4921, and USD 86.70 respectively at the time […]
Daily Brief – US Payrolls
Humphrey Percy
Mon 9 Mar 2026
US Payrolls Consensus is a wonderful feeling for market analysts and the consensus among them leading up to Friday afternoon’s release was that there would be 60,000 new jobs in the US economy announced for February. As it turned out there was a certain safety in numbers in that those analysts were all wrong when […]
Daily Brief – Relief Rally
Humphrey Percy
Wed 11 Mar 2026
Relief Rally Without pouring cold water and stressing that we do hope that the reason for the relief rally that started on Monday evening and saw Bonds and Equities rebounding strongly is well founded, we remain to be convinced given the uncertainties on how the Iran war will be resolved. Given that Oil had spiked […]
