Volatility in currencies has risen sharply as the clock is ticking faster for Brexit and Trump’s first day in the white house.  Welcome to the “Trump’s movie week” and fasten your safety belts.

The dollar slumped 1.28% last night as sterling rebounded 3% against the greenback after the UK Prime Minister Teresa May laid out her blueprint for Brexit in a landmark speech last night. The market’s reaction was fast and furious, simply saying “sell on rumor, buy on fact”. GBP/USD surged more than 300 pips to 1.240 this morning.

Momentum indicators (MACD, RSI) on hourly charts suggest that sterling is temporarily overbought and may face more selling pressure today.

In an interview with The Wall Street Journal last night, Trump said that the US dollar was “too strong”, in part due to China’s effort to hold down the yuan. As a result, USD/CNH tumbled almost 1% or 650 pips this morning. However, if I remembered correctly, Chinese policy makers were trying hard not to let renminbi depreciate too fast. Two weeks ago, the central bank adopted measures to support the renminbi in the offshore market and curb capital outflow. Therefore Trump’s view on China’s currency policy is a bit contradictory.

Earnings season kick started in the US. Morgan Stanley’s 4Q earning was far better than expected. This evening, the market is waiting for results of Goldman Sachs and Citigroup to paint a clearer picture of the economic outlook.

GBP/USD (Hour chart)

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