Risk remained well supported through yesterday as central banks continue to leave the door open for easing, European stocks rallied to 2 week highs. In the US it was a similar story, stocks rallied as the US Fed held off on raising rates while also projecting a less aggressive path for rate hikes, the NASDAQ traded to a record intraday high posting its second consecutive record close. Overnight things have slowed somewhat, perhaps some profit taking into the weekend and for now the majority of European bourses have opened in the red as S&P futures in the US also track lower following a weaker overnight in Asia. The USD was an underperformer, the USD index trading down almost .6% on the day at one point, before firming up late into the US session. NZD was also a weaker performer following dovish comments from the RBNZ, while JPY continues to hold firm despite a re-shuffle of policy from the BOJ. Elsewhere a rally in GBP was short lived, sterling pairs rallying through much of yesterday before coming under selling pressure from the European close, EURGBP broke back above .8600 again this morning while GBPUSD traded as low as 1.3004, looking for progression lower.
Today’s data calendar is void of any major US or UK data, but we do get a look at Eurozone PMI figures which have already been released and resulting in a marginally weaker Euro, as both the services and Composite reading came in below expectations, although better than expected manufacturing figures helped to soften the blow. The ECB have been resolute, in that they continue to offer to stand ready to act if necessary, but continue to put pressure on member states to act accordingly to take individual responsibility. This continues to provide the Euro with some safe haven status, as the ECB bond buying program continues. We’re very much in a wait and see mode but considerable declines in the German services PMI figures, to 50.6 from 52.2 expected might stoke some additional concern for the region.
The USD has rebounded somewhat from lows yesterday but we have a long run to December and with plenty of micro, macro and political risk for the fed to take into account, USD direction is sure to be volatile. There are three Fed speakers due across the wires this evening, in my view Fed commentary going forward becomes key, if I’m to be convinced the FOMC are ready to raise rates in December I will need to see unified rhetoric from all Fed speakers, voters or otherwise. And of course the data coming from the US must be at least passable as well.
GBPUSD traded above resistance ahead of 1.3100 yesterday but quickly ran into sellers and we tested back towards 1.3000 already this morning. There are three key levels to watch here, 1.3000 is mid support, a break below opens up a retest of this week’s lows towards 1.2950. While a break above 1.3120 opens up potential towards 1.3200.
EURUSD is range bound and quite boring to be honest, support around 1.1130 with topside resistance above 1.1300. Everything in the middle is just noise as we bounce around without any real direction.
EURGBP took a run towards .8620 this morning, although quickly ran into sellers after the slightly weaker PMI’s. That being said GBP looks a little heavy today, a break above .8630 favours a move back towards post brexit highs above .8700.