The Euro was an out-performer on the day and all the press headlines were shouting about GBP weakness as a result. EURGBP pressed higher driven by Euro demand and the pair traded to .9238, (€1.0825 for every pound) that is the highest level we have seen since October 2009 with the exception of last year’s GBP flash crash which saw the pair spike above .9400. The good news for the Euro was not carried in Mario Draghi’s morning address but in the release of stronger PMI data, which helped the single currency remain supported throughout the day as expectation grows for the ECB to scale back their easing program.
Risk sentiment was slightly more cautious on the day, European indices pressed lower giving back Tuesday’s gains, while it was a similar story in the US with selling accelerating following warning of a government shutdown from President Trump in order to address boarder wall costs as we approach another deadline for the US debt ceiling, which appears to be more of an open air amphitheater these days. Overnight we have seen some slight USD recovery, the Euro is also marginally weaker, and GBP is slightly firmer this morning.
There has been very little let up for GBP in recent weeks and the pound continues to struggle for traction as Brexit guidance papers are released on a near daily basis, in the meantime inflation concerns continue to press and any hope the BOE may raise interest rates to help combat inflation has had a wet blanket thrown on it by recent BOE meetings. Thus the pound has been left idling, caught between uncertainty around Brexit and central bank policy, it lacks any clear direction and finds itself at the mercy of other currency flow and so far this summer it’s been struggling against USD and the dominant Euro.
Sadly data for the UK has failed to support the pound, GDP just released confirmed .3% growth through Q2, making the UK the slowest growing nation in the G7 for the second quarter in a row. EURGBP now looking at highs around .9236 for resistance and again larger sellers above .9400 while support just above .9200 holds for now, with .9155/60 area below that. GBPUSD traded as low as 1.2773 before bouncing off the support highlighted yesterday, 1.2920 offers firm resistance to any moves to the upside.
Jackson Hole takes center stage in the US as the world’s financial leaders come together for the economic symposium. Major central bank speakers will take the most attention with Yellen and Draghi both due to speak tomorrow but any commentary from the event will be a target for traders and any insight into policy will be closely watched for. EURUSD continues within range 1.1730 up to 1.1828, a break below 1.1730 will target 1.1661 which needs to give if EURUSD is to continue lower.