The dust has been settling after last week’s GBP turmoil and while the pound remains under pressure, just off last week’s lows, the outlook for GBP continues to be fragile as uncertainty around the Brexit process, and how “hard” it will be, weighs. It is often the case that the reaction is worse than the fact but until the facts are clear our outlook for GBP remains subdued and the pound has found itself under some light selling to begin the week. Stocks in the US closed lower on Friday, a weaker Non-Farm payrolls print and weaker than expected wage growth saw the USD positive sentiment subside, the USD index dropped some .85% in the aftermath of the figures, the greenback facing selling across the board, with the exception of GBPUSD as no one wanted any part of that.
Overnight we’ve seen some recovery in the USD, last night’s second presidential debates once again appear to have favoured Hilary Clinton and the dollar is stronger as such. Broader risk sentiment however is weak, European stocks have opened lower following a slightly weaker overnight in Asia. The path of Brexit remains key to the outlook for GBP, while for the USD we need to see data and Fed commentary remain supportive for December rate hikes to come to fruition, while for the Euro, last weeks “taper” comments were quickly retracted, with several ECB comments trying to assure markets QE would remain in place to March 2017 and potentially beyond.
Today is quiet on the data front, German trade figures already released were better than expected but we’ve seen little reaction in terms of EUR pairs, if anything the single currency is slightly weaker. Tomorrow’s ZEW survey is probably the highlight of the week for Euro data releases so the single currency will likely be looking to other crosses for direction as well as risk appetite. EURGBP has found itself running into sellers on any progression above .9000, with last week’s highs revised down to .9435. A break sub .8900 would be required to see extended moves lower in this pair but for now any dips will likely find Euro buyers. EURUSD gave the lower end of its range a test last week with progression towards 1.1100 on Friday (a move aided by GBPUSD drop), recovery in the Euro was quick however and EURUSD was quickly back into its range trading above 1.1200. Again we continue to look for a break of the 1.1115 to 1.1285 range to set new direction for EURUSD, otherwise we expect additional consolidation.