Yesterday certainly felt like summer mode had kicked into markets and despite it being earnings season, markets remained somewhat lacklustre. On the data front Eurozone consumer confidence was marginally better than expected, although still not great at -6 vs -7 expected so still rather downbeat. US home sales were slightly weaker than expected but to be honest were hardly noticed in markets. The early morning was focused on absorbing US President Donald Trump’s aggressive tweet warning Iran not to threaten the United States, although that has since passed by. The USD was generally firmer on the day with EURUSD dropping back below 1.1700, while GBPUSD dropped back below 1.3100 while the weighted USD index was up just over .5% from the lows of the day. The euro was slightly weaker in general, EURGBP also dropping lower towards .8910 area, which appears to be providing light support for now.
There really hasn’t been much action to note otherwise, in the UK PM May passed comment that Brexit plans were being well received, I’m not quite sure by whom but the pound didn’t care either way. The UK’s foreign secretary Neil Hunt took aim at the EU warning them to change their Brexit approach or face the risk of “no deal by accident”. Now considering that the UK government can hardly decide on what Brexit should look like themselves, meaning the EU have got very little to work with up until this point (outside of a few loose plans and guidelines) it would seem the comments are misdirected. The EU were never going to make it easy for the UK to leave but at the current juncture, the no deal prospect is rising. Next up for GBP were several comments across the wires from the BOE’s Broadbent who said he was unsure if he would vote for a rate hike in the August meeting, he also defended asset purchases and stated that the unwinding of QE could result in deflationary pressures, which could then lead to the BoE having to cut interest rates. No exactly hawkish talk as we approach the August second meeting.
We’ve seen mixed data released already this morning. German PMI data was on the whole better than expected, French figures were weaker however and the Eurozone’s composite PMI missed estimates to the downside, despite a stronger manufacturing reading. The euro had popped higher initially given the balance of German data but the region wide reading is enough to stoke some euro selling. It’s quiet enough on the data front for the rest of the morning and Markit PMI’s will headline the US calendar. A moderate slowing of expansion is expected across manufacturing and services but unless we see a big miss to the downside the Greenback should remain firm.
EURGBP finding interim support around .8910/.8800 region, a break below there would favour a drop back towards .8830. While .8960 still provides resistance to any move higher.
EURUSD topped out ahead of 1.1750 yesterday, we traded as low as 1.1654 already this morning and with the USD looking stronger and not much change for the euro I think we’ll keep our recent range between 1.1600 and 1.1750, there is potential for spikes either side as low as 1.1550 and as high at 1.1800 but we haven’t seen these levels maintained for two months.
GBPUSD battling either side of 1.3100 thus far this morning, sub 1.3000 still offers support and any rally should stall ahead of 1.3300 so looks like we’re locked in a range here as well.