August is traditionally one of the quietest months in the calendar year for markets so month end flows will be closely watched today and has the potential to bring in some volatility before we really enter a period of lower volume trade. Broadly speaking risk has maintained a positive tone through much of July, helped by better earnings across Europe and the US as well as some dovish leanings from major central banks. The USD remains at 14 month lows as a weaker outlook for US inflation now suggest the Fed are near the top of their current tightening cycle. It’s quite the opposite for the euro which sits around 2 year highs against the USD and just short of post-Brexit highs against the pound, on expectations the ECB are about to scale back on their asset purchases. The pound, although weak against the firmer euro is holding firm against the beleaguered USD and currently holds above 1.3100.
There’s enough data to sink our teeth into today, first up is CPI inflation data for the Eurozone with July inflation expected to be confirmed at 1.3% year on year. There is plenty of positivity and expectations priced into the euro and technically the single currency is looking over bought at these levels. That being said these conditions can prevail and the euro may well continue to find buyers through to September when the ECB will come back into focus. EURUSD looks towards 1.1780 for resistance to moves higher, with 1.1665 and 1.1616 offering near term support to any pull back lower. EURGBP has a tight range, looking like .8920 to .8980, we have seen euro demand on recent month ends so a press to the upside might test resistance into 4.00pm later today.
It’s a quiet enough calendar in the US and attention now will focus towards US data into the end of the week with Non-Farm payrolls upon us once again. The fact is the USD is now very sedate, further rate hikes into the year-end have almost all but been priced out, so any data indicating the US economy is outperforming may well fall help the greenback towards some relief rally. GBPUSD looking towards topside resistance around 1.3160/80 area, with more sellers above 1.3220. 1.3050/80 area provides a level for GBP buyers to re-emerge.