GBP/EUR 1.1605 (0.8617)
Yesterday was light on the economic calendar and the USD remained under pressure following the FOMC minutes and as the market absorbed comments from Fed Chairman Ben Bernanke. Despite market reaction the Feds tune does not appear to have changed, Bernanke commented that he believes the economy still needs easing, that is why it is still in place for now, but as the US figures show signs of improvement then QE tapering will become a reality.
Last weeks’ jobs figures were a step in the right direction but no tapering is expected until later in the year (September/October).The rise in weekly jobless claims from 340k to 360k put pressure on the greenback later in the day but USD strength is likely to resume should data support stronger US growth.
Today’s calendar has a little more action and the EUR has found itself under some pressure as Industrial production figures top the morning hours. Markets are expecting to see a .3% decline in the month of May, one of the weakest readings in 4 months and should the reading come in as expected it is likely to support the ECB’s recent concerns and dovish tone, rate cut expectations may put the single currency under further pressure should the reading miss to the down side.
We are also expecting LTRO repayment information at 11.00 a.m, this is not necessarily the biggest market mover but repayments do represent a contraction to the ECB’s balance sheet so any large or surprising repayments will support the EUR somewhat, although follow through will be very much limited.
Inflation data from the US in the form of Producer Prices welcomes us into the US session, producers expecting prices rose close to .5% in June. Later in the evening we have the July U. Of Michigan confidence survey and this is expected to have picked up to 84.7 versus 84.1 in June, reaching the highest levels in 6 years. Strong readings will see taper expectations rise once again.
EURGBP has been slowly making its way back to .8600 from highs above .8675. This pair is likely to have further support below at .8575 with only a break below here opening up a move back towards .8520 for next week. EURUSD well capped at 1.3100 with Wednesdays highs at 1.3200 out of reach for today. We are looking for a move back towards the 1.3000 zone where it gets choppy, we’ll need strong US figures to see a push back below this area. GBPUSD held ahead of 1.5200 with support at 1.5050 holding any moves lower.