It was a shaky end to last week’s trading, markets in Europe on Friday traded lower including the UK’s FTSE, while in the US major US indices closed more or less flat despite showing some early gains. In currencies GBP covered a full spectrum of emotion from dovish concerns on Carney’s comments which saw it sell off, to hawkish following Haldane’s words, allowing the pound to rally higher and eventually closing the week slightly firmer against both Euro and USD. The greenback had an inverse performance during the week, starting on a strong foot but gradually selling off to finish just slightly higher on the week but still .6% off the one month highs experience For the most part the Euro direction was dictated but other currencies, movement in euro was predominantly led by GBO flows, and it was likewise with the USD, both pairs maintaining recent ranges and thus they come back into focus this week.
While the Euro has been taking second place for most moves there is still plenty on the table that can potentially impact the single currency. IFO data released this morning was better than expected and while it gave the Euro some slight lift, it certainly won’t be a game changer. There are two key area’s I’m looking at to dictate our euro view, that’s inflation across the region, and of course ECB policy, or scaling back on easing to be more precise. With that in mind it will be interesting to see if ECB president Mario Draghi has anything to say on policy as he speaks several times today, he certainly hasn’t been advocating ending easing and has tended to tow a more cautious line vs other ECB council members. EURUSD range for now continues to be 1.1215 to the topside which far larger sellers above towards 1.1260/1.1300 area, while support at 1.1116 holds for now and for confirmation of a breakdown I’d really need to see sub 1.1100 on the daily close. EURGBP is likewise trading a relatively narrow range, .8850/70 holds moves higher, while .8718 and .8678 are key support areas to the downside.
The pound is a little trickier to forecast these days, we not only have to local political battle as PM May tries to secure a coalition with the DUP, but we also have ongoing Brexit talks which at this point seem to be going relatively smoothly, but any headline can create shocks waves through GBP. Then we have the BOE, where key figures are giving mixed messages and as such most are trying to clear from any major sterling positioning. The range for the last two months has been 1.2600 to 1.3050, quite narrow considering all that has happened in that time frame, and suggestive that once we begin the see some movement, it will be a larger break out. For now, the shorter term we looking at intraday support around 1.2820 while 1.2600/1.2588 is an area to watch for support on the downside.
We’ve plenty of action from the US this week in terms of data. Durable goods headlines today’s headlines for the afternoon calendar, but this week we also have trade balance, consumer confidence and GDP figures, as well as a number for Fed speakers. There’s plenty to sing our teeth into there this week, let’s hope it’s not a dull as last week’s markets.