Summary:

• GBP traders await big moves with Brexit deal in focus

• GBPUSD hits 5-month high ahead of EU summit

• Disappointing retail sales push US rate cut odds higher

• DE30 hits new 2019 high

Last week saw the GBPUSD post its largest 2-day rally in over a decade as the pound surged across the board on rising hopes of a new Brexit deal. With the market soaring over 600 pips from last week’s lows is it setting itself up for a big disappointment or will there be further gains ahead. Talks between the UK and EU have continued today ahead of the EU summit which will start tomorrow. Support for any such deal in  the UK parliament is also in doubt with mixed reports coming out on the position of the DUP. 

It’s been a typically volatile session for GBP pairs but one the European close the pound is trading higher against all its peers. The largest gains can be seen in the antipodean pairs with a 0.7% increase seen vs the New Zealand dollar. GBPUSD also trades firmly higher an earlier hit its highest level since May at 1.2854. 

US headline retail sales slumped 0.3% month on month in September, falling short of the median estimate of a 0.3% increase. Core sales, ex auto, dipped 0.1% while the median Bloomberg estimate had called for a 0.2% pick-up. On the other hand, we were also offered upward revisions to the August numbers - this has offset bearish tone to some extent. The US dollar has moved down in a knee-jerk move and on balance is trading a little lower on the day. 

It’s been another decent day for stock market bulls with Euorpean indices leading the gainers with several benchmarks on the continent hitting new YTD highs. The DE30 came close to moving above the 12700 mark in the past hour and dips continue to be keenly bought. In the US the price action has been not quite as positive with the major indices remaining below the weekly highs, but they are still trading in the green at the time of writing. 

Here’s a short video on the latest Brexit developments which focuses on the rising volatility in the pound as well as the technical setup for several GBP pairs and UK stocks: