Forex snapshot

Both EUR/USD and GBP/USD tread water ahead of a plethora of economic data released today from the European Central Bank and the Federal Reserve.

Five and ten pound notes
Source: Bloomberg

Cable traders await this afternoon's US data

This morning has seen some slightly softer UK services purchasing managers index figures released, but the majority of focus is on this afternoon’s US data releases.

The last couple of weeks have seen GBP/USD traders focus on the Sterling side of the equation, as Bank of England governor Mark Carney has sent conflicting messages regarding the timeline for interest rate changes in the UK. Today it is very much the turn of the US dollar to dictate the direction of GBP/USD.

Yesterday’s particularly strong ADP non-farm employment changes are likely to see last-minute upward revisions to market expectations for today’s employment figures. With the Dow Jones closing at an all-time high last night, although below the intraday high, it is questionable if the US needs anything else to trigger optimism.

Spot FX GBP/USD chart

Can Mario Draghi successfully talk down the euro?

Last month’s announcement from the ECB has already seen the implementation of negative interest rates for bank deposits. However, the new targeted long-term refinancing operations will not begin until September, and we are currently in a lull period as far as action is concerned.

It is unlikely that a dearth of action will prevent the ECB president from doing his best to talk down euro strength. Judging by the currency markets behavior over the last couple of weeks, the benefits of his original action have worn off.

As my colleague Brenda pointed out, the upward trajectory for GBP/USD could drag the EUR/USD higher too.  

Spot FX EUR/USD chart

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