US dollar weakness offers momentary relief

The template of US dollar strength against most of the global currencies has been halted, at least in the short-term.

Dollar and euro currency
Source: Bloomberg

EUR/USD eyes $1.22

The downward trajectory of EUR/USD has abated over the last 48 hours, with this morning seeing German trade balance figures jump higher. This good news has been somewhat countered by France, once again disappointing, by posting a worse-than-expected trade balance and government budget balance.

As my colleague David Madden pointed out yesterday, EUR/USD has been eyeing up an attack on the $1.22 level and this has, for the time being, been put on hold. Today’s 35 point move higher might be welcomed but much of a move above $1.24 or approaching the 50-day moving average looks optimistic.

EUR/USD chart

GBP/USD still stuck in tight range

The weakness in the US dollar has helped see 120 points added to GBP/USD and once again enter the $1.56-$1.58 range that it has spent much of the last two months trading in.

This morning has seen currency traders treading water as they waited for the UK to publish both manufacturing and industrial production levels, but with both coming in considerably worse than expected the pressure will come back on sooner rather than later.

The perception that the pace of recovery in the US is outpacing the UK has increased, with expectations that the enthusiasm-killing ‘considerable time’ comment will no longer be appearing in any of the Federal Reserve’s commentary. If this transpires, currency traders will no doubt jump to conclusions that change is imminent.  

GBP/USD chart

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