This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
There are a couple of events to keep an eye out for heading into the weekend, with Ukraine’s presidential election results and the European parliamentary vote also concluded. Uncertainty around how the results will be construed, particularly by Russia, is probably keeping the single currency constrained at the moment. EUR/USD has maintained a tight range around 1.365 all week with traders reluctant to bid the currency higher.
There is a huge sell the rumour trade going on at the moment and this puts the ECB at serious risk of underwhelming come June. The market is looking for decisive action from the ECB, action that will stimulate growth and at the same time keep the euro at bay. ECB members are currently split over the implications over a stronger exchange rate, but the general consensus seems to be it wants to see a weaker euro. As a result, should the ECB underwhelm, we could see the single currency bid higher and reverse swiftly as traders buy the fact.
Single currency testing support against the sterling
While EUR/USD is relatively sidelined, an interesting cross to watch at the moment is EUR/GBP. While Europe struggles with persistently disappointing data, the UK has been steadily showing signs of improvement. Yesterday the UK posted a much better-than-expected quarterly business investment reading, while a revised GDP reading was confirmed at +0.8%. EUR/GBP is threatening to break lower at the moment and a close below 0.809 will be key in the near term. The pair is not quite in oversold territory just yet and as a result could have further to fall.