The promise of fiscal measures from the UK’s Autumn Statement helped support GBP through much of yesterday as politicians look to position the UK for Brexit, although sterling was an out-performer against the weaker Euro, it managed to just about hold its ground against the far stronger USD, closing flat on the day. The greenback was once again a notable out-performer, the USD index once again edged to fresh highs as US data was firmer than expectations, although the reaction to the FOMC minutes released later in the evening was somewhat more muted, perhaps most had departed for the Thanksgiving holidays by that stage. The Euro continues to find itself under selling pressures, and once again we are beginning to see calls for EURUSD parity as the ECB and Fed policies diverge once more. Risk appetite was mixed through much of yesterday, in Europe stocks were moderately lower on the day, while in the US, major indices posted slight gains.
For the market, It is almost a given at this stage that the Fed will raise rates in their December meeting so last night’s FOMC minutes stirred very little in the way of market movements, the minutes showed that most FOMC members agreed that the case for raising rates was strengthening, but the minutes themselves gave very little guidance towards December. More telling perhaps, was yesterday’s stream of data releases. Durable goods order rose 4.8% vs 1.7% expected, U of Michigan’s confidence survey grew from 91.6 to 93.8, while New Home Sales were the only let down, falling 1.69% vs a .5% decline expected. It’s worth noting however that Durable goods and Home Sales data have both been lacking consistency this year, the dollar didn’t care however as EURUSD fell to fresh lows, back below 1.0530 support (and last Decembers lows) with lows towards 1.0518 this morning, before we saw a slight rebound. GBPUSD still finds support above 1.2300, while progress above 1.2500 area runs into selling resistance. It is a US holiday today for thanksgiving so we would expect some reduced liquidity throughout the day.
The Euro is struggling to find any meaningful traction as expectations for additional ECB easing mount. Rumors yesterday that the ECB would remove the yield floor restrictions on bonds they can buy didn’t help the single currency, nor did weaker PMI data from Germany, despite the Eurozone figures being firmer than expectations. German data was to the downside once again this morning with construction spending weaker than expected through Q3 as was capital investment, although GDP was as expected. The IFO report was mixed, with business climate and expectations both weaker than expected. EURGBP remains bearish on our view, we have broken below the 50% retracement of the post Brexit rally in EURGBP, we’ll be looking for downside towards the 200 day EMA at .8400. The 100 day EMA at .8638 remains our bear line, providing we hold below it. Intraday EURGBP should find resistance ahead of .8600.