Markets awoke this morning to digest the news that President Donald Trump has decided to walk away from the previously agreed nuclear deal with Iran. From a market perspective, this left emerging markets under pressure and complicating the outlook for commodities. The US dollar however continued its recent rally and posted further fresh gains for a fourth day. For EURUSD, we saw a new 2018 low at 1.1822 which pushes us towards key support at 1.1710/15, a key technical line for the 1.0435 to 1.2557 trading range. Also of note has been the GBPUSD cable, which closed below the 200 Day Moving Average also pushing nearer key support at 1.3480/85 (on the 1.1985 to 1.4378 range).
Looking at the majors, EURGBP is also showing some interesting movement ahead of tomorrow’s Bank of England MPC interest rate decision. By the end of last week, the market had pretty much discounted any chance of another rate hike tomorrow which only a week previous was showing an 80%+ probability. This was then reflected in the EURGBP rally to a high of .8842 on Friday. However, this morning we see EURGBP under pressure again, back down at .8749 as the BoE conversation now turns not to what they do tomorrow but whether Governor Carney keeps a 2018 rate hike alive. What it says is likely to grab the headlines and set the pound’s fate, with markets monitoring the language of the statement to decide whether it’s a hawkish hold or a dovish intent that will determine the possibility of a hike later in the year.