GBP taking centre stage this morning with Cable falling to a fresh 2-month low following comments over the weekend from UK Prime Minister Theresa May. The PM continued the mantra of a “hard Brexit�, stating that regaining control of immigration was a priority, even if that costs Britain’s membership of the single market. The move now puts us in sight of the 1.2100 handle which defines the bottom of the range for the price action post the algo flash crash that occurred on the 7th October. I certainly wouldn’t rule out a test of the 1.21 mark as soon as today with the USD looking firmer this morning (DXY +0.27%) and a sense of inevitability about GBP ahead of the eventual triggering of Article 50 at the end of March. Elsewhere, oil has come under renewed pressure having fallen back down to the $53.00 level following news that Iran continues to aggressively increase its exports given its exemption to the OPEC cut now underway. In addition to this, the operational US rig count is now at a 1-yr high with increases seen in 30 of the last 32 weeks. Given the broader consensus of higher prices this metric will likely become a talking point moving forwards as traders will be monitoring the pace in which the US starts producing as a potential headwind to the on-going production cuts from OPEC and non-OPEC nations. The Day Ahead The calendar ahead is fairly quiet with no major tier-1 economic data on the docket. As such I would be monitoring the performance of the USD today to see whether this cable move has any more momentum to the downside as traders search for the best opportunity in otherwise a quiet day. There are two Fed speakers later (Rosengren and Lockhart) but I would not be expecting anything market moving from either given the communication of three hikes in 2017 has been clear and the fact that both are non-voting members. Despite the weaker equity market and higher gold prices I think it would be a bit much to say these markets are in risk off mode. In fact in terms of US equities we look to re-enter a long position given the fact the NFP on Friday just further cemented the solid state of the US economy and long-term we foresee further upside in US equities. As a consequence of this view we anticipate higher US yields and as such a firmer USD supporting our calls for short T-notes and EUR/USD. The final asset is crude oil in which we look to follow the trend lower in the wake of the points discussed above.

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