FX Update: The pound hit fresh major-trend lows
FX Update: The pound hit fresh major-trend lows in thin Asia markets (both Japan and Singapore centres have been closed for public holidays), which put Cable at a 31-month low at 1.2015, GBP-JPY at a 33-month low and EUR-GBP at a 10-year high, at 0.9324. The fresh lows follow Friday's unexpected quarterly contraction in Q2 GDP data (of -0.2%) and with markets increasingly convinced that Boris Johnson and his newly formed Brexiteer cabinet are not bluffing when they say they the UK will leave the EU without a deal on October 31, if necessary. One increasingly dominant view in market narratives is that Johnson will take the UK out of the EU without a deal and re-negotiate terms with the EU from the "other side", although this would be risky as, unless he bolsters his position in a general election, he would be a significant risk of having his government taken down in a confidence vote. The pound managed to lift out of its lows on a London Times report that pro-EU members of parliament are aiming to force Johnson to delay Brexit as a means to avoid a no-deal Brexit. Johnson is reportedly set to be meeting with Irish prime minister, too, though it would be highly unlikely that the two would make any substantive progress with regard the Irish backstop blocking point. Elsewhere in currency markets, the other majors have been trading in narrow ranges. EUR-USD continued to orbit the 1.1200 level, which has been the case for a week now. USD-JPY settled in the mid 105.0s, above the seven-month low seen last week at 105.27. The PBoC set the midpoint of the yuan fix at 7.0211, a new 10-year-plus low, after 7.0136 on Friday.