Forex snapshot

Negative sentiment persists in both EUR/USD and GBP/USD, as the resurgent US dollar continues to pile on the pressure.

Five and ten pound notes
Source: Bloomberg

GBP/USD still oversold

As widely expected, the Bank of England left interest rates unchanged. Judging by the market’s reaction to this, and the pound’s inability to hold onto the small gains at the beginning of the week, the sentiment remains firmly bearish. Many are now focused on Wednesday 20 August when we will see if any of the voting members have decided to support an increase yet.

Since 2011 we have not seen any of the Monetary Policy Committee members vote to do anything other than to hold rates. Although the picture painted by economic releases from the UK continues to point towards recovery, the pace of improvement in the US has picked up in comparison.

GBP/USD is still oversold but still above the 200-day moving average down below at $1.3735, and it is possible that this might offer some support.

EUR/USD below $1.34

The last couple of days have seen a pause in the downward trajectory of EUR/USD, as the markets have absorbed the latest European Central Bank interest rate decision. The ECB confirmed it would leave the interest rate at record lows of 0.15%. As ever, the early afternoon press conference with Mario Draghi was entertaining, while at the same time offered no further insight to future tactics that had not already been announced.

This week has seen a succession of disappointing figures from Germany, with factory orders, industrial production and latterly trade balance figures all missing expectations and increasing worries that Germany is finally struggling under the weight of having to prop up the rest of the eurozone.

Even with a couple of days where buyers have appeared, the levels below $1.34 look to be the more likely area that EUR/USD will trade. 

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