Gold Extends, Brexit Talks Hit Snag

While the focus is on the broad USD weakness, we shed light on GBP weakness amid fading hopes for a Brexit deal this as negotiations broke down with no plans to meet again before Wednesday's 'deadline'. Sterling is broadly weaker. Reports that Saudi Arabia started an internal probe into Khashoggi disappearance is also helping to stabilise oil. US retail sales are due next. Gold hit 1233 and tests the 100-DMA against USD, EUR, JPY and CHF. New charts & reasons were added to the Premium index and metals trades.

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Hopes were high for a deal on the key Brexit issues on the weekend with an announcement ahead of the EU leaders summit but the thorny issue of the Irish border, along with other issues have left both sides at an impasse. Raab took a last-second flight to Brussels Sunday to try to break the deadlock but it failed and there are no further plans to talk.

Perhaps cable close at the daily lows on Friday was a sign of things to come. It fell as low as 1.3083 from 1.3150 at Friday's close. The drop left a 50 pip gap on the chart. EURGBP recovers off the 100-DMA. No new talks are scheduled but that could change quickly. As we saw in NAFTA and in years of EU crisis negotiations, 'deadlines' are rarely final.

Other weekend news included a drop by as much as 7% in Saudi Arabia's market after Trump threatened “very powerful” measures due to the Jamal Khashoggi disappearance drama. In turn, Saudi Arabia threatened a response with the local press hinting at moves to drive up the price of oil. Crude was up more than 1% in early trade.

Focus turns today's US September retail sales at 1230 GMT. The consensus is for a 0.4% in the control group, following a disappointing 0.1% rise in the August data. A strong reading could shore up sentiment in markets if it's a reminder that consumers are strong. However a weak reading could be interpreted as a sign that higher interest rates are hitting harder than anticipated.

Towards the end of the US session we may also get the semi-annual FX report from the US Treasury and on whether China will be labeled as an FX manipulator. The last time Beijing was designated as such was in 1994.  There is no scheduled day for the release but a Politico report says it's coming Monday (others say Tuesday). Early leaks suggest it will maintain the status quo but any escalation in the commentary could spook markets.