Dollar drops again

EUR/USD and GBP/USD are up on the session due to a broad decline in the dollar. 

Pound coins and dollar note
Source: Bloomberg

Euro eyes $1.14

The euro is creeping higher as the dollar continues to slide, and even though there has been little in the way of economic announcements, EUR/USD is reverting to the upward trend it has been in since the Federal Reserve meeting in mid-March. As I previously stated, Greece is still bubbling away in the background and political pressure will come to a head near the end of the month when a series of repayments are due. In the meantime, traders are more interested in the US, and when interest rates will rise.

The commentary at next week’s Fed meeting will be crucial, and traders are split over as to when the US central bank will make the first rate hike. The latest non-farm payrolls and US JOLTS numbers have been impressive but the concern is that US citizens are saving and not spending, and that is why some dealers don’t foresee a rate rise this year.

The target to the upside is $1.14 and if it is cleared the May high of $1.1467 will be in sight. Any moves lower in EUR/USD will find support in the $1.12 region.

GBP/USD rallies ahead of Mansion House

The pound has pushed higher against the greenback as traders look forward to the Mansion House speech tonight, where the economic update from George Osborne and Mark Carney will shed some light on the state on the economy. Mr Osborne is tipped to focus on running a budget surplus, while corporate governance will also get a mention, but traders will be listening out for any remarks in relation to house prices or growth to ascertain how dovish or hawkish Mr Carney is.

The Bank of England lags behind the Fed in the race to who will increase interest rates first, but the gap between the two is becoming smaller while GBP/USD appears to be making another attempt on the $1.58 level. If the pound drifts lower the $1.52 mark will act as support.

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