We saw a mixed session yesterday, European stocks traded lower through the morning following the lead from a weaker Asian open. Much of the early tension was put down to geopolitical jitters and European banks were hardest hit through the morning. The USD also found itself facing some selling through the day on North Korean and general US administration concerns, although US stocks recovered from early losses to close the day just slightly lower with all eyes now pointing towards Jackson Hole due to kick off on Thursday. Overnight general risk appetite has improved, Asian bourses are generally in positive territory and the European open has started the day firmly, while US futures are currently pointing higher as well.
The Euro traded higher throughout the day and markets are not expecting Draghi to announce anything in terms of reduced easing this week, that may provide some downside however for Euro pairs especially should we see Draghi hint or suggest that the rapidly appreciating Euro poses a risk to inflation and growth. We have some data from the region this morning in the form of the ZEW economic sentiment survey, both the German and European reading are expected to be slightly weaker for August and this may well feed into some Euro weakness on the day. EURUSD traded as high as 1.1828 before selling overnight and this morning saw it fall back below 1.1800, major support towards 1.1730 area still attracts but we need to see a daily close below there for downside to continue.
GBP cannot find any traction and public finance data will be the primary focus for this morning’s calendar. The pound has found itself under pressure again this morning and selling has been seen across both EUR and USD already, amongst others. EURGBP touched fresh highs this morning at .9173, the highest levels since last October’s flash crash and the slow grind higher in EURGBP continues, despite indicators pointing to the pair being heavily overbought. This certainly provides very opportune levels for GBP buyers against the single currency and we have seen corporate active in hedging exposures on the move above .9000 in recent weeks. GBPUSD range remains tight and we are on the way to test support at 1.2842, further support below at 1.2828 and then 1.2810 all need to clear if we are to see GBPUSD breakdown lower, while any rallies towards 1.2900 finds sellers.