Forex snapshot

David Madden looks at how recent announcements have weighed on EUR/USD and GBP/USD.

Euro hovering above $1.37

The euro is now trading at $1.3719, after pulling back some of the ground lost after France revealed a drop in inflation in April. Mario Draghi is finally coming around to the idea that he may need to intervene by loosening monetary policy. As Alastair McCaig stated, the euro is suffering from his comments last week, and now that the Deutsche Bundesbank has suggested it would support monetary easing it now seems as though the eurozone central banks are prepping the market for the inevitable.

A move below the important $1.37 mark could put us on track to hit the 200-day moving average of $1.3682. Tomorrow’s eurozone CPI and flash GDP will give us a clearer picture of the region.

Spot FX EUR/USD chart

Inflation report weighs on pound

The pound is now trading at $1.6787, down 0.2% on the day as UK jobs data and the inflation report drag on the pound. The good news is that unemployment in the UK has dropped to its lowest level in five years, but the bad is that weak wage growth suggests that the recovery is not as solid as the headline figure suggested.

Mark Carney has stated that the UK economy is only getting back to normal now and does not want to get ahead of himself and that interest rates therefore remain unchanged for ‘some time’.

The profit at the start of the week turned into shorting this morning, but I would be surprised if the pound goes below $1.67. Traders had high hopes for the inflation report, but when the dust settles I suspect sterling will move towards the $1.69 mark.

Spot FX GBP/USD chart

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