Forex snapshot

After yesterday’s bounce both GBP/USD and EUR/USD have returned to form by selling off in the morning session.

Euro notes
Source: Bloomberg

Euro remains rangebound

The last four weeks have seen EUR/USD remain rangebound between $1.26 and $1.24, with the top end of the range correlating with the 50-day moving average.

Currency traders will, this morning, have the ability to listen to European Central Bank president Mario Draghi as he speaks at the twenty-fourth European Banking Congress. Of course, it is likely that any references to ‘whatever it takes’ and ‘QE’ could be contradicted by either the Deutschebank president Jens Wiedmen or German finance minister Wolfgang Schaeuble. The likelihood of contradictory statements points towards another day spent range trading.

The lows from 17 November, around of $1.2450, could offer support, while a move above $1.2560 might require more stimulus than the markets can offer.

Cable traders wary of eurozone impact

The debate over who will raise their interest rates first, between the UK and the US, has seen currency traders picking over the ‘considerable time’ phrase used by the Federal Reserve.

As my colleague David Madden highlighted yesterday, traders aren’t expecting either country to raise their rates until well into 2015. The fourth quarter tends to be dominated by the retail sector, and yesterday’s monthly retail sales out of the UK were better than expected.

Those looking for a reason to believe that the UK can maintain its recovery while the eurozone continues to stall were given a little ray of light, but with both the manufacturing and service PMI figures worse than expected from France, Germany and the eurozone it’s hard to believe the impact will not be felt sooner or later.  

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