Forex snapshot

Alastair McCaig looks at how recent economic data and announcements have affected the EUR/USD and GBP/USD pairs.

GBP/USD gives back a little of yesterday’s gains

Following yesterday’s release of voting data by the Monetary Policy Committee from their last meeting, sterling gained strength against the US dollar. Helping to drive sterling strength was the better-than-expected monthly retail sales figures from the UK. It is becoming increasingly clear that the speed and momentum of the UK recovery is greater than that of the US and as such, GBP/USD continues to have upward pressure. These latest figures put renewed expectation on the Bank of England to start talking about when it will begin raising the UK base rate.

Last night’s comments from Janet Yellen did nothing to alter the balance, and only an overnight selloff in the Asian markets trading hours has prevented an even higher level being hit.

Although GBP/USD hit selling pressure when it popped above $1.69, it still looks likely that we will see this level being broken probably sooner rather than later.

Spot FX GBP/USD chart

EUR/USD struggles as French data disappoints.

This morning saw the release of French, German and EU manufacturing and service purchasing managers index figures predominantly posting weaker-than-expected results. The French figures have shown the economy in retraction, and will have done nothing to dampen the fears that France is not in a position to help Germany lead the rest of Europe out of recession. For their part, Germanys disappointing manufacturing figures reflects a country showing the signs of strain from the overhanging fears over energy supplies being tightened by Russia. The news that, after a decade, Russia and China have finally agreed a deal for Russia to supply gas, will have increased German business worries.

The 200-day moving average in EUR/USD has been broken, and the longer-term bullish trend looks set to be tested. Only the oversold state of the relative strength index will give those who are long a ray of light. Any close below this could trigger further selling and lower lows.

Spot FX EUR/USD chart

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