Yesterday never really offered us anything to get excited about. The day started with risk appetite favoring an advance, in Europe equities had opened positively and we saw some fresh highs posted but this sentiment changed through mid-morning as European stocks dropped from 2 year highs. The DAX fell back from record highs while the euro found itself mixed with EURUSD breaking to fresh lows yesterday morning before the single currency recovered on some comments from the ECB suggesting some of its members are not too happy with the open ended approach.
GBP found itself under the spotlight as well, the pound was generally weaker across the board yesterday but nothing really driving that weakness. Some concerns about PM May’s government once again hitting the headlines as she faces losing Priti Patel and this in the wake of an embarrassing weekend following blunders from Boris Johnson. GBP weakness stemming from concerns over more side shows will impact the real focus on Brexit talks which are due to take place today, while EU officials warn the UK that they have less than a month to make some concessions. The USD was slightly firmer on the day but all in all the USD is little changed since October 27th, with the USD index trading within a .75% range for that timeframe. US indices were mixed, all posted intraday highs, and only the Dow managed to close at a record while the S&P and NASDAQ were both slightly off.
There was some wind taken out of the USD’s sails late yesterday evening following some comments from the Fed’s Patrick Harker. Harker felt a December rate hike was still on the table but wanted to see some progress on inflation before committing to 2018 rate hikes. Elsewhere in the US the Tax proposal is expected to be out Friday. Trump’s Far East trip has been relatively quiet to be fair, nothing too headline grabbing and certainly more “presidential” than some might have expected but overall Trump has continued to tow the party line and this has proven positive to the US outlook.
Major pairs are pretty much unchanged in their outlook. The break to fresh lows in EURUSD certainly maintains a bias to trade lower and as we’ve guided in the past we expect this to press back towards 1.1425 area. Any rally higher should find some resistance at 1.1622, with firmer above at 1.1691. GBPUSD range is steady between 1.3025 and 1.3318 and anywhere in the middle we expect the rate to just chop around. Our bearish bias remains in EURGBP and only a closing break above .9020 will change that view, for now we need to see a downside break below .8730 to see further declines.