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The pound was gutted during the session, mainly because of Brexit Secretary Raab’s resignation, which caused Brexit-related fears to flare up again.

And apparently, the pound wasn’t the only victim since the euro was also dragged lower because of that disappointing news.

And since Brexit-related fears were reignited, all the safe-haven currencies were naturally in demand, with the yen coming out on top.

  • U.K. retail sales m/m: -0.5% vs. 0.2% expected, -0.4% previous
  • U.K. retail sales y/y: 2.2% vs. 2.8% expected, 3.3% previous
  • Euro Zone trade balance: €13.4B vs. €16.4B expected, €16.8B previous
  • U.S. retail sales report coming up

Major Events/Reports:

Brexit Secretary Dominic Raab quits

Not a day has passed since British PM Theresa May announced that her cabinet has signed off on the draft deal and we get this devastating news (for Theresa May).

Other Brexit-related updates

Raab’s resignation wasn’t the only Brexit-related news during the session.

You see, Northern Irish Democratic Unionist Party (DUP) MP Jim Shannon was interviewed by the BBC before Raab quit.

Shannon was asked if the DUP would vote against Theresa May’s deal, and Shannon replied as follows:

“We certainly will … We feel very much betrayed.”

And more devastating news came out later (and still ahead of Raab’s resignation) since Robert Peston, Polical Editor of ITV, reported that Theresa May’s own Conservative Party may be plotting to take her down.

By the way, Raab wasn’t the only minister who quit. At the time of writing, Esther McVey, Shailesh Vara, and Suella Braverman have also officially announced their resignation.

There was also this tweet from Christopher Hope, Chief Political Correspondent at The Daily Telegraph, which appears to support the earlier tweet from Peston.

U.K. retail sales report

The U.K.’s retail sales report for the October period was released earlier during the session.

And unfortunately, it revealed that headline retail sales volume in the U.K. contracted by 0.5% month-on-month, which marks the second consecutive month of contractions and is contrary to expectations for a 0.2% recovery.

A closer look at the details show that the textile, clothing, and footwear stores, as well as household goods stores fared very poorly in October.

Moving on, the year-on-year reading was also a swing and a miss since it came in at 2.2% (+2.8% previous).

But on a slightly upbeat note, the previous monthly reading was revised from -0.8% to -0.4%. That’s still a negative reading, though. Also, the revision likely won’t be enough to push Q3 GDP growth higher.

The annual reading for September was also revised higher from 3.0% to 3.3%.

However, the poor annual reading in October is still the weakest in six months and marks the fourth consecutive month of ever weaker annual increases to boot.

Another risk-off day in Europe

The major European equity indices had a promising start, but it soon became clear that risk aversion is still plaguing European market since the major European equity indices began to broadly pare their gains and most were already in negative territory by the end of the session.

Market analysts attributed the risk-friendly start to growing hopes that the trade war between the U.S. and China will finally end.

As for the returning risk-off vibes, market analysts blamed that on renewed Brexit fears after Dominic Raab announced that he was quitting as Brexit Secretary.

  • The pan-European FTSEurofirst 300 was down by 0.40% to 1,419.37
  • Germany’s DAX was down by 0.09% to 11,403.56
  • The blue-chip Euro Stoxx 50 was down by 0.20% to 3,200.05

Major Market Mover(s):

GBP & EUR

The pound and (to a lesser extent) the euro were hit hard during the morning London session.

Both the euro and the pound began encountering sellers early on, thanks to DUP MP Jim Shannon’s interview, since that likely made traders skittish about Theresa May’s leadership position, as well as raising concerns about her Brexit deal.

However, what really pushed the pound and the euro off a cliff and into the abyss was Dominic Raab’s resignation, since that really cast doubt on a Brexit deal and also made a leadership challenge against Theresa May into a very real possibility.

GBP/USD was down by 166 pips (-1.28%) to 1.2813, GBP/CHF was down by 166 pips (-1.28%) to 1.2883, GBP/AUD was down by 179 pips (-1.01%) to 1.7634

EUR/USD was down by 23 pips (-0.21%) to 1.1311, EUR/CHF was down by 21 pips (-0.20%) to 1.1373, EUR/NZD was down by 29 pips (-0.18%) to 1.6613

JPY

All the safe-haven currencies (JPY, USD, CHF) were in demand during the session, but the yen was apparently the safe-haven of choice since it outperformed its fellow safe-havens.

USD/JPY was down by 6 pips (-0.06%) to 113.46, GBP/JPY was down by 200 pips (-1.36%) to 145.37, EUR/JPY was down by 35 pips (-0.28%) to 128.34

Watch Out For:

  • 1:30 pm GMT: Headline (0.6% expected vs. 0.1% previous) and core (0.5% expected vs. -0.1% previous) readings for U.S. retail sales; read Forex Gump’s preview
  • 1:30 pm GMT: ADP’s Canadian non-farm employment change (28.8K previous)
  • 1:30 pm GMT: U.S. Empire State manufacturing index (20.0 expected vs. 21.1 previous)
  • 1:30 pm GMT: Philadelphia Fed’s manufacturing index (20.0 expected vs. 22.2 previous)
  • 1:30 pm GMT: U.S. import prices (0.1% expected vs. 0.5% previous)
  • 1:30 pm GMT: U.S. initial jobless claims (213K expected vs. 214K previous)
  • 3:00 pm GMT: U.S. Fed Governor Randal Quarles will testify before the Senate Banking Committee
  • 3:00 pm GMT: U.S. business inventories (0.3% expected vs. 0.5% previous)
  • 4:00 pm GMT: U.S. crude oil inventories (2.9M expected vs. 5.8M previous)
  • 4:30 pm GMT: Fed Chair Powell is expected to deliver a speech
  • 6:00 pm GMT: Atlanta Fed President Raphael Bostic will speak
  • 9:30 pm GMT: Business NZ manufacturing index (51.7 previous)