It may have been a UK bank holiday yesterday but that never stopped the pound being sold, EURGBP rising to the highest level in almost a year. 17th Sept 2017 was the last time we saw these levels and with little resistance the pair managed to drive higher yesterday. The price action in EURGBP the last two months has been almost a mirror image of the move higher in 2017. In that move higher the pair peaked out at .9300 on August 30th before dropping back over 6% to.8750 by the end of September. I must point out that it wasn’t just GBP weakness leading the move higher in EURGBP yesterday, the euro was in high demand and EURUSD found itself up almost 1% from the day’s lows, pressing to 1.1700 this morning.
Elsewhere the Jackson Hole economic symposium continued over the weekend and Fed rhetoric was once again supportive of raising interest rates in September. There was some concerning talk however, President Trump was complaining once again and there was some speculation he could fire the new chair Powell. The USD sold off in trade yesterday, the trade weighted dollar index down almost .5% and while the Fed remain on track for two rate hikes this year, USD weakness is beginning to extend further than expected and much of the driver has been Trump led. This is an ongoing concern considering the Federal Reserve are meant to remain independent. If the US President begin threatening this, then we can expect increased volatility across the USD.
Broad based risk appetite remains very well supported, stock markets were all showing strong gains yesterday, especially in the US, where Trump announced an agreement in terms for a new trade deal with Mexico. This new bilateral agreement with replace NAFTA, however Canada are out of the loop still and Mexico have confirmed they’d prefer to proceed with Canada in the agreement. Nothing has been signed and we’ve seen this grandstanding before but stocks do not care and in the US trade at record high levels once more. It’s a case of watch this space for now.
Markets are slowly getting back to normal trade and it will be full steam ahead come next week. Data is still on the light side this week and today’s calendar is pretty bare save for ECB board member Praet speaking in Germany on US consumer confidence later in the day. US GDP headlines tomorrow data releases, while consumption figures make up the back of the data. Eurozone unemployment and CPI figures make up the notable prints for the back end of the week. The UK will be looking at any progress on Brexit.
EURUSD should find itself well capped ahead of 1.1750, while 1.1520 area should now provide the first area of support.
EURGBP has plenty of upside technically, with little resistance higher until .9300 area. However it is looking very overbought and a pullback is due, .9000/20 area should provide the first bit of support on a move lower.
GBPUSD finds light resistance to a move higher around 1.2900/20 area, with light support around 1.2800.