Forex snapshot

Sterling has slipped versus the US dollar as the post-referendum selloff kicks in, while the euro is jumpy as traders don’t know how to react to Germany’s decline in manufacturing and jump in services output.

Frankfurt financial district
Source: Bloomberg

The pound trims gains

GBP/USD is trading at $1.6352. Some of the gains that were made on the back of Scottish referendum have been pared and, as Chris Beauchamp stated, the bounce has come to an end.

It is a quiet week in terms of UK economic announcements, and this could allow the US dollar to dominate as it has done for the past few months.

Yesterday, William Dudley of the Federal Reserve stated that the level of inflation did not justify an increase in interest rates but the Fed’s decision will be data driven.

Fed member Jerome Powell is due to speak at 2.20pm (London time). Central bankers are known to contradict each other, so if Mr Powell takes a more hawkish tone it could drive the pound to $1.6291, with the next level below at $1.6260.

Euro indecisive after mixed German figures

The euro is trading at $1.2861. It edged higher as traders reacted positively to the increase in Germany’s services PMI even though the manufacturing PMI declined in September. Since the positive and negative updates from Germany essentially cancel each other out I suspect it will remain rangebound. The euro may approach $1.2881 before it makes another attempt on $1.28; the risk remains on the downside.

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