Pound Drops on Hard Brexit Fears, US Dollar May Rise on Fed Bets -

Talking Points:

  • Pound drops on "hard Brexit" fears before key UK PM May speech
  • ISM and ADP data may feed Fed rate hike bets, boosting US Dollar
  • NZ Dollar falls as milk price drop stokes RBNZ rate cut speculation

The British Pound traded lower as worries about a "hard Brexit" continued to swell ahead of a much-anticipated speech from Prime Minister Theresa May at the conclusion of the Conservative Party Conference in Birmingham. The UK unit has faced heavy selling pressure since the Premier hinted at an early-2017 timeline for starting the EU exit process and suggested that immigration controls will take precedence over securing access the single market over the weekend.

The final round of UK PMI figures will probably pass with little fanfare as investors opt against committing to a directional bias before Ms May's remarks. A policy speech from BOE Deputy Governor Ben Broadbent may generate a bit more attention if he suggests that the central bank is gearing up to boost stimulus further in anticipation of a rocky EU negotiation. Still, lasting follow-through seems unlikely until after the Prime Minister has laid out her vision.

Later in the day, US economic data will be in focus as ISM Non-manufacturing Composite gauge and the ADP Employment report cross the wires. A pickup in service-sector activity growth (53.0 vs. 51.4 prior) and a mild slowdown in job creation (165k vs. 177k prior) are expected in September. Recent stabilization in US news-flow relative to consensus forecasts may foreshadow outcomes broadly in line with recent trends, which FOMC officials have signaled are supportive for a rate hike before the end of the year. Confirming as much may boost the US Dollar .

The New Zealand Dollar underperformed in overnight trade after dairy auction produced the lowest prices in two months. The drop was seemingly interpreted as encouraging a more dovish RBNZ posture as reduced revenues on sales of the island nation's top export commodity hurt overall economic growth. Indeed, the currency paced a decline in front-end bond yields. The priced-in probability of a 25bps cut at next month's policy meeting now stands at 68 percent.

Losing money trading in the FX market? This might be why .

Asia Session

22:30 AUD AiG Perf of Services Index (SEP) 48.9 - 45
23:01 GBP BRC Shop Price Index (YoY) (SEP) -1.8% - -2.0%
00:00 NZD ANZ Commodity Price (SEP) 5.1% - 3.2%
00:00 USD Chicago FRB Evans Addresses CFA Society Event - - -
00:30 JPY Nikkei Japan PMI Services (SEP) 48.2 - 49.6
00:30 JPY Nikkei Japan PMI Composite (SEP) 48.9 - 49.8
00:30 AUD Retail Sales (MoM) (AUG) 0.4% 0.2% 0.0%
05:30 NZD RBNZ's McDermott Comments on Panel - - -

European Session

07:00 EUR ECB's Nowotny Speaks in Vienna - - Low
07:45 EUR Markit/ADACI Italy Services PMI (SEP) 52.0 52.3 Low
07:45 EUR Markit/ADACI Italy Composite PMI (SEP) 51.5 51.9 Low
07:50 EUR Markit France Services PMI (SEP F) 54.1 54.1 Low
07:50 EUR Markit France Composite PMI (SEP F) 53.3 53.3 Low
07:55 EUR Markit Germany Services PMI (SEP F) 50.6 50.6 Medium
07:55 EUR Markit/BME Germany Composite PMI (SEP F) 52.7 52.7 Medium
08:00 EUR Markit Eurozone Services PMI (SEP F) 52.1 52.1 Medium
08:00 EUR Markit Eurozone Composite PMI (SEP F) 52.6 52.6 Medium
08:30 GBP Official Reserves Changes (SEP) - -$463m Low
08:30 GBP Markit/CIPS UK Services PMI (SEP) 52.2 52.9 Medium
08:30 GBP Markit/CIPS UK Composite PMI (SEP) 52.3 53.6 Medium
08:30 GBP BOE's Broadbent Speaks in London - - Medium
09:00 EUR Retail Sales (MoM) (AUG) -0.3% 1.1% Low
09:00 EUR Retail Sales (YoY) (AUG) 1.5% 2.9% Low
10:30 GBP UK PM May Speaks at Conservative Party Conf. - - High

Critical Levels

CCY Supp 3 Supp 2 Supp 1 Pivot Point Res 1 Res 2 Res 3
EUR/USD 1.0992 1.1093 1.1148 1.1194 1.1249 1.1295 1.1396
GBP/USD 1.2488 1.2629 1.2678 1.2770 1.2819 1.2911 1.3052

--- Written by Ilya Spivak, Currency Strategist for

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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