May Sets Day For Brexit, Tankan next

The pound fell in early trading after May confirmed rumors that Article 50 will be invoked in Q1 2016. The Canadian dollar was the top performer last week, while the yen lagged. The Japanese Tankan is due next. UK PM May confirmed told the BBC that she will invoke the clause to leave the EU by the end of March and strongly re-committed to leaving the union. The pound opened down 70 pips on the news to touch 1.2903. A new trade was issued a on Friday afternoon and accompanying 10-minute video was posted to back it up. Our sterling short remains in progress.

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That was perhaps an overreaction. Last month, the EU's Tusk relayed that May told him it would be invoked early in the year and similar chatter has spilled out of Parliament.

If anything, the large market reaction emphasizes the lack of buyers for the pound. The Q1 confirmation from the PM herself is negative news but the depth of the selling underscores the sentiment on the pound at the moment. It's even further shown by the large jump in speculative GBP shorts in the CFTC report.

Another currency that has struggled lately is the Canadian dollar. It touched a five month low last Monday then bounced 150 pips to close out the week. That recovery may sound good but consider the outstanding string of good news for CAD in that time: Oil rallied 5%; Canadian GDP was at 1.3% in July vs 1.0% exp; the S&P 500 recovered to finish the week higher; Trump struggled, suggesting fewer NAFTA risks.

We can't rule out that quarter-end flows suppressed the loonie last week (and skewed other markets), so we will be watching closely in the days ahead.

On the calendar, look for early-week moves in the yen. An Abe advisor essentially confirmed that Kuroda will be turfed in 19 months at the end of his term. That may just be politics and an effort to make him a scapegoat for the failures of Abenomics but it adds some uncertainty to what his predecessor's playbook will be.

In the short-term, the closely-watched Tankan survey for Q3 is due at 2350 GMT. The consensus is for a +7 reading for large manufacturers, down from +6 in Q2.

AUD traders should also note that Sydney and Melbourne moved their clocks one hour forward on the weekend.

Commitments of Traders

EUR -76K vs -85K prior JPY +69K vs +59K prior GBP -88K vs -59K prior CHF -6K vs +8K prior AUD +15K vs +7K prior CAD -12K vs +16K prior NZD -7K vs -8K prior