Market News & Insights
16 October 2017

May Surprise Supports GBP

While much of Ireland and parts of the UK baton down the hatches and await Hurricane Ophelia to make its landfall, its business as usual in global markets. Central banks remain the key drivers, as markets cautiously eye the Fed for potential rate hikes by year end, we also have heavy focus on the ECB towards the end of the month while also keeping watch over the BOE who have been making hawkish sounds, albeit from a weakening economic position. The broader environment, particularly in the US remains supportive of risk with S&P, DOW and Nasdaq pressing to record highs last Friday. The USD itself was weak through midafternoon trade following weaker than expected CPI inflation readings from the US, the USD index has since managed to recover somewhat and is now up almost .6% from last week’s lows (posted on Friday). The pound has been showing some slight weakness in recent weeks as markets assume the worst case scenario for Brexit, however this morning we have seen GBP slightly firmer following news PM May will head to Brussels for a surprise visit to try end the deadlock on negotiations. Overnight we saw a positive performance in Asian bourses, while the JPY has been an outperformer overnight vs the USD.

There is not too much data to spike our interest today so we’ll be focused primarily on recent technical ranges. EURGBP has been interesting, we initially saw the fall back towards .8750 as indications of additional declines but the failure to breach on hold below .8750, a resulted in EURGBP pressing higher last week. Once again we say a rally higher towards the highlighted area of .9000 where once again sellers were out in force. So we have seen a false break to the bottom side and to the topside in recent weeks and now EURGBP looks set to drop back towards the .8800 area. Only the extremes of this recent rage matter for now and we are likely to just see some chop around the ranges should we stay between .9000 and .8750.

EURUSD enjoyed a press higher through much of last week, helped by some hawkish ECB comments over last weekend but this morning the single currency is finding itself somewhat under pressure. The failure to break back above the 1.1900 area favors some downward progression back towards support zone between 1.1680 and 1.1735. A break back below 1.1680 should see Euro losses extended back below 1.1400 but likely we’ll be waiting until the ECB at the end of the month for real Euro moves. A break above 1.19000/1.1875 area will likely favour EURUSD pressing back towards recent highs towards 1.2100.GBPUSD is slightly higher this morning as GBP outshines, however Fridays highs at 1.3340 offer first line of resistance. Light support at 1.3284 hold for now but the real outlook for GBP today will likely stem from Brexit headlines with May due to visit Brussels.