The dollar continues to soften

The currency has continued its recent trend of weakness as GBP/USD sets six month highs. 

GBP/USD
Source: Bloomberg

GBP/USD continues to make up ground
The Federal Reserve and FOMC have continued to be less than convincing when discussing interest rate rises in the US. Less than six months ago the currency markets consensus view was that we would have two 25 basis-point cuts before the end of 2015, with the first possibly as early as June.

Subsequently, this timeline has been pushed further and further away as the phraseology of those voting members has become increasingly wooly. At the same time as this, the economic data that has come out of the US has become less encouraging. Although the US still remains considerably further down the road of recovery than the rest of the world, that lead has slowly but surely been eaten into.

This recent run in GBP/USD has taken it back up to six month highs and the $1.5825 level will be a real test of the resilience of this move. Once again, the currency cross has moved into heavily overbought territory that may well be the catalyst for a correction if not a change in direction.

GBP/USD

European bank holidays lead to a lack of releases
Although equity and currency markets remain open today, a number of European countries – France and Germany among them – have bank holidays. This results in an absence of economic data releases from the eurozone.

We are currently enjoying a short lull in the almost continuous Greek debt debate as they have just met one deadline and we are still a couple of weeks away from the next. The difference now is that the International Monetary Fund and European Central Bank have decided to hold firm on the release of the already approved tranche of financial assistance to Greece. They are waiting to receive firm commitments from Syriza that it will embark upon the range of austerity measure to tackle the underlying issues Greece faces. As unpopular as this will be with the electorate, this is something that will need to happen to avoid the country defaulting on its debt repayments and seriously hampering any such future operations.

EUR/USD rate has shown some resilience in the last month but this is more down to the perceived weakness in the US economy rather than an improving opinion of the eurozone. Having moved into overbought territory this might well be the call to action the sellers have been waiting for.

EUR/USD

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