Forex snapshot

Sterling slips below $1.70 after Mark Carney is quizzed by the Treasury Select Committee, while EUR/USD has gained ground despite the latest German IFO figures missing expectations.

Pound coin and dollar note
Source: Bloomberg

Pound drops below $1.70

The pound is trading at $1.6992, down 0.2% on the day after Mark Carney stated that interest rate increases would be data driven.

When Mr Carney began his role as governor, he cited 7% unemployment as his short-term target, and also stated that any interest rate increase would be limited and gradual. The larger-than-expected slack in the labour market would suggest that we won’t see interest rates rise for some time.

The pound traded as low as $1.6973 following Mr Carney’s comments, but it has recouped some of its losses. I suspect traders were expecting a more hawkish statement from Mr Carney, and now that the dust has settled we could see the pound head back to the pre-statement level of $1.7030.

Euro climbs despite German figures

The euro is trading at $1.3622, up 0.15%. The currency pair dropped after June’s German IFO report missed expectations, however it quickly recovered its losses.

It has has been trading within the $1.3580-$1.3620 range for the past few trading sessions, and is likely to remain rangebound for next couple of days.

On Friday, Germany will reveal the latest inflation numbers. Consumer price index data is probably the most important economic indicator as far as the European Central Bank is concerned.

As I stated yesterday, the short-term target for the euro is $1.3560, with the recent high of $1.3640 acting as resistance.

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