Despite some strong words from the US president towards the end of last week, the threat/fear of war has subsided somewhat and diplomacy appears to be favored going forward, and the weekend passed without any escalation as Donald Trump had his hands full with domestic issues. Markets on Friday saw risk recover somewhat with equities trading higher on the day, the USD however faced heavy selling as weaker CPI inflation data weighed on the greenback and rate hike expectations for the Fed. The Euro was firmer on the day Friday, EURGBP pressing to highs above .9100, while EURUSD trades back above 1.1800. We have an active week ahead, needless to say on the geopolitical from we’ll be keeping an eye on US/NK relations, while also looking at Venezuela, a nation in freefall and another dangerous tinderbox that could cause markets some concern. In fundamental data we have plenty to focus on as well, with minutes due from the last Fed, ECB and RBA meetings. Meanwhile the VIX volatility index remains elevated, having closed last week up over 5% on the week. So while things have settled down somewhat, markets still remain cautious.
GBP has started the week under some pressure following Brexit related headlines over the weekend. Fundamentally however we will be waiting for tomorrow’s release of CPI inflation data, which may be the only thing that can give the pound a boost this week. Inflation is expected to have risen through July to 2.7% yoy. EURGBP looks set to test towards .9140, while downside finds buyers and support towards .9050 and firmer around .9009 below. GBPUSD continues to be range bound between support at 1.2950/30 area and resistance around 1.3030/60 area. Not much else to get our attention today, so broader risk trends will be the main focus. EURUSD has light resistance around 1.1855 but August highs above 1.1900 offer a firmer level, while moves lower will finds support at 1.1755 and 1.1704