Another interesting day in markets yesterday but the key drivers in major currencies remained the same. For the UK and GBP, it was Brexit debate that dictated sterling’s direction. Sadly for the pound positivity was short lived. GBP had started the day on the advance pressing EURGBP lower back towards .8775 and GBPUSD higher, up above 1.4000, as demand for GBP was steady through the morning. However, debate on what shape a customs union might take quickly saw the pound fall out of favour as Corbyn spouted Labour’s desires for a customs union. All this just creates more noise and uncertainty that distracts from the main issues and puts pressure on PM May who is due to speak on the issue on Friday. Of course the growing issue for May is a challenge to her leadership and the potential for a Labour government in the UK. Sterling continues to rally on signs of Brexit progress, however any speedbump results in a quick reverse. EURGBP larger range is .8730 to .8900, with some spike extremes taking it outside of that range in the last 6 months but nothing that’s lasted a day. Intraday today .8840 should provide resistance to moves higher while support just above .8760 area would attract on euro weakness. GBPUSD trend remain higher, albeit tentatively and 1.3900 holds drops lower for now, a break below there could see larger GBP selling.
In the Eurozone ECB president Mario Draghi stated yesterday there was no currency wars . He also reinforced the ECB’s stance that they would continue to provide the necessary support and stimulus to the Eurozone economy. All very textbook stuff from Draghi and any time he speaks markets are keen to interpret exactly what he means. The previous statements carry little weight. Some, including myself, would argue that Draghi and the ECB are making their point very clear that easing and stimulus is to remain in place, however markets are looking for change so Draghi comments that headline inflation would “gradually resume its upward adjustment” was enough to see help the Euro rally higher. The sticking point in the context was that he also said providing continued easing, as uncertainties prevail. One such uncertainty could come in the form of Italian elections this coming weekend, markets apparently not pricing in any risk to Euro pairs thus far but could result in some Euro fragility later in the week. In the shorter Term CPI for Germany due today (slowing price growth expected) and for the Eurozone tomorrow may well weigh on Euro intraday. 1.2355 acts as resistance for EURUSD, while 1.2290 area provide support of the uptrend for Feb.
Stateside we have plenty of key data points. Durable goods orders, consumer confidence, advance goods trade balance and finally the Feds Powell first testimony to congress all cross the wires today. All have the ability to impact the Durable goods and balance data are both expected to be weaker while consumer confidence is due to see an uptick and the new fed chair is unlikely to rock the boat too much, the basis of his statement was released on Friday and the USD is unlikely to see a seismic shift on his commentary today.