There was not really too much action to sink our teeth into yesterday and while Theresa May crossed the wires, GBP crosses and other major currency pairs were little changed on the day. GBPUSD bounced off Friday’s lows but was more driven by USD weakness than anything else while EURGBP was slightly softer as the May headlines emerged and the pound rallied moderately, dropping EURGBP down as low as .8906 but we are pretty much back to where we started yesterday with overnight highs around .8949.
EURUSD was more or less flat on the day, trading within an anemic range between 1.1756 and 1.1719. The single currency slightly firmer this morning following some hawkish ECB comments which have lifted the demand for euro but the major focus will be on Eurozone data and the ECB’s meeting at month end. Overnight we saw some choppy trade in Japan equity with the JPY rallying some .9% from Friday’s highs suggesting some slight risk off in Asian markets. The USD itself continues to give back ground across the board from Friday night highs and while EM markets have seen a shaky start to the week, the USD has been a dominant players vs emerging currencies but has been finding itself under some pressures from G7 crosses.
The euro finds itself supported to open up the day, against the USD at least. Comments from the ECB suggesting that Eurozone banks have been stressed tested and could accommodate rate hikes without risk was seen as hawkish and hence drove some euro demand. The firmer euro this morning was also helped by some better than expected German trade data which saw both imports and exports rise through August at a rate of 1.2% and 3.1% respectively. We are void of any further euro data and with some big UK figures due across the wires shortly, and some Fed speak from the US later this afternoon, the single currency will likely find itself once again driven by the value of its cross currency, rather than the euro leading the way. EURUSD range remains in play for now, again last week’s lows towards 1.1700/25 area provide support while rallies towards 1.1820 will run into the first group of sellers. Only after a break above 1.1860 would we consider EURUSD heading back towards recent highs at 1.2100 area.
UK PM Theresa May was speaking yesterday on Brexit as round 5 of talks were under way. She offered reassurance that her party remain committed to the delivery of Brexit, on terms that are best for the British people. May sought to highlight her full confidence in Philip Hammond and Boris Johnson who’s been hitting the headlines recently, for the wrong reasons. However as the case has been for over a year now, the longer negotiations continue without much headway the bigger the potential disruption and for the very first time we are starting to see businesses making real preparations for a no deal exit. The EU have said the ball is in the UK’s court and for many the reality of a potential hard Brexit is getting closer. EURGBP needs to break back below .8915 if we’re to see a test back towards lows around .8750, while any rally higher again runs into selling interest and resistance at .9000 area.