It was a slow start to the week in terms of developments on the economic data front, markets only really had Mario Draghi to focus on and he failed to inspire any major volatility but by late afternoon all attention was on the UK. PM May had hoped to have the spotlight to herself, I would imagine as UK Parliament gave her power to trigger Brexit without any amendments to the bill, it only needs the royal seal at this stage. This means the UK are now in a position to trigger article 50 when they like, and much like the Fleetwood Mac song, she can go her own way. Most likely this will occur towards the end of the month, with expectations pointing to after the upcoming Dutch elections. Not to be outdone, Scotland’s Nicola Sturgeon is looking to have another Scottish referendum for independence. Many expect PM May to reject such a proposal but for GBP it once again creates additional uncertainty.
The pound had rallied through much of the day yesterday but this landslide of uncertainty has seen GBP facing selling, down over 1% from yesterday’s highs while EURGBP is up .75% on the pounds weakness. GBPUSD broke through last week’s lows and traded towards 1.2110 this morning, while we still see the first major support towards 1.2080, while upside resistance will likely first be found around 1.2252 area. EURGBP is looking towards last week’s highs around .8790 for resistance and a break below .8620 will likely be required to see a change in direction for this pair. BOE will be in focus on Thursday as well.
Elsewhere the USD outperformed, the greenback initially faced some selling on Friday following the payroll figures, as we mentioned a weaker wage growth number and some profit taking into the weekend likely accounting for that. All eyes will be in this week’s FOMC meeting tomorrow evening and while a rate hike is priced for March and almost fully priced for June also, markets will be keen to focus on the Fed’s guidance for potentially more tightening through this year. With this, we will be looking at the Fed’s updated economic projections and of course Janet Yellen’s comments as she holds her press conference. Fed members have convinced us rates will rise, they’ve all been very vocal about that objective, we now need to see this maintained should the Fed look to continue on their path. EURUSD has rallied above 1.0700 briefly on yesterday, although the 100 day moving average (EMA) at 1.0715 quickly saw sellers emerge. Last week’s resistance around 1.0630/40a rea offers first light support but again, the 1.0525 -1.0500 area is the real base in place for now.