**BREAKING: GBP has just seen a pop at the time of posting after comments that EU’s lead negotiator Barnier has told MEP’s that a breakthrough in talks is likely**

The Day So Far

A risk on move has been witnessed across assets at the recommencement of trade after the Senate Republicans narrowly approved their version of the US Tax bill. Although the deal is far from complete, work will now begin in bringing the two chambers of Congress together. This latest development is certainly a move in the right direction and enough for the likes of Goldman Sachs to up their US GDP estimate for the next two-years with Deutsche Bank analysts also revising up their number of Fed rate hikes in 2018 to four in total from three previously seen. In addition to this comments from President Trump in that he seems open to negotiated changes on the final bill also reflects some degree of flexibility and compromise from a leader that has usually remained steadfast that it is his way or the highway.

Elsewhere, the focus this side of the pond remains firmly fixed on Brexit negotiations with important meetings taking place with the plan to sign a joint declaration on progress. The latest this morning from a European Affairs Minister for Ireland was that the UK and Ireland are not close to a breakthrough on the Irish border issue but progress has been made. In terms of Cable what has been surprising in recent weeks is its resilience in the face of uncertainty but with much riding on a solution on the border issue the Pound faces the prospect of an aggressive repricing to the downside should today’s talks fall flat ahead of key EU meetings on Wednesday and the Summit taking place next week.

The Day Ahead

Although my preference is for a long position in the US equity market the difficulty today is finding a good place to enter given the volatile price action seen on Friday due to the ABC News story. Meanwhile, we also look for a long in EUR/USD at lower levels with our view being that USD strength will be maintained as North American participants play catch up with the positive developments on Capital Hill and the risk that the Pound could quickly weaken if Brexit talks breakdown further supporting the strategy.

 

Anthony Cheung
Anthony is a leading market commentator with over a decade of experience accumulated as Head of Market Analysis at a leading news and analysis organisation, and now a Director of Amplify Trading.