Forex snapshot

GBP/USD continues to bounce and has now moved out of oversold territory, while EUR/USD has spent all week moving laterally under the $1.30 level.

US dollar and sterling note
Source: Bloomberg

GBP/USD out of oversold territory

When looking at the pound this week it has been hard to get away from discussing the implications of Scotland voting for independence. With this being the case, GBP/USD has been guided as much by referendum polls as it has by economic data.

Overnight the latest YouGov poll has shown that the ‘No’ vote has again taken the lead. This week has seen both Westminster and the City pay considerably more attention to what is happening in the Scottish referendum. This has led to a more proactive attitude from both politicians and companies as they have lobbied for those still undecided. The fact that a number of the major financial companies based in Scotland have voiced their fears that relocation into England might be a consequence of independence has contributed to the swing in sentiment.

Next week will see plenty of statements and counter statements over the possibility of Scotland retaining the pound, and this should ensure a negative weighting on GBP/USD.

EUR/USD moving laterally

A fresh round of sanctions against Russia could trigger retaliatory sanctions heading in the other direction, all of which will be negative for the eurozone as much as for Russia. My feelings towards this are negative as there is a fairly unimpressive track record for the success of sanctions. Trying to force your will on leaders through these means invariably fails, especially when those leaders have built their reputation on strength like Vladimir Putin has.

This morning’s eurozone industrial production figures and quarterly employment change may give sentiment a further nudge. EUR/USD continues to move laterally while holding below the $1.30 level. Only some particularly disappointing US retail sales figures, out this afternoon, might change that bearish sentiment.

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