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Forex snapshot

Disappointing eurozone data has given little reason to slow the decent pace in the EUR/USD rate. Meanwhile GBP/USD has fallen away over the last month as markets fear the US might beat the UK in the race to raise interest rates.

Euro/dollar notes
Source: Bloomberg

EUR/USD awaits US data

Yesterday saw German unemployment figures improve in tandem with the eurozone unemployment rate of 11.5%. Any positive sentiment gained from this has now been lost as the inflation rate continues to drop and Spanish, Italian and eurozone manufacturing purchasing managers’ index figures have all missed the mark.

The 300 plus pip fall in the EUR/USD rate over the course of July has been driven primarily by the US data releases, and the improving outlook. The dwindling levels of confidence are a reflection of an economic region struggling to maintain a recovery, hampered by numerous global issues out of their control.

Even though EUR/USD is oversold on the relative strength index, sentiment continues to weigh on it and a move above $1.34 looks unlikely until the US data-heavy afternoon session is out the way.

EUR/USD chart

GBP/USD below 100-DMA

Currency traders have been increasing the chances of the US raising its interest rates ahead of the UK. The perception is that the UK might be in a position to do this in the first or second quarter of 2015, and that the US would be able to increase sometime in the second-half of 2015. The UK has seen the pace of the improving economic data begin to slow, undoubtedly hampered by the disappointing news from the eurozone.

Yesterday’s US jobless claims were in line with expectations, giving a greater chance that today’s non-farm unemployment change will be close to the 233,000 jobs expected.

The US has shown impressive resilience when handling the continuing reduction in the monthly debt purchasing scheme. Now down to just $25 billion on a monthly basis, it looks well on course to cease all debt purchases before the end of 2014.

The GBP/USD pair has sold off by 250 pips in the last month and during yesterday’s trading session broke below the 100-day moving average. Unless support is found soon, the ability to re-challenge the $1.70 level could be some time away.

GBP/USD chart

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