Forex snapshot

Traders of pairings EUR/USD and GBP/USD will be keeping their eyes on a number of macroeconomic reports to be released this week.

Euro pulls some losses

The euro has managed to make up some of the losses it suffered against the US dollar last week.

The single currency is trading at $1.3768, up slightly on the day after the currency took a big hit at the end of last week when European Central Bank president Mario Draghi finally suggested he might tackle the eurozone’s deflationary problem. For too long the euro has been sleepwalking into higher ground against the US dollar, while the economic situation in the eurozone has been steadily deteriorating. We are not expecting any major economic announcements from the eurozone today, but the German ZEW tomorrow will tells us how high or low investment confidence is in the strongest economy in the region.

The situation in Ukraine is still bubbling away in the background, but the major focus of the week will be on eurozone flash GDP and CPI figures on Thursday. The wheels came off the euro last week and the announcements ahead of us could keep it in downwards motion towards $1.3680. 

Spot FX EUR/USD chart

Pound rebounds from last week

The pound has bounced back from last week’s breather as traders look ahead to Mark Carney’s update on Wednesday.

Sterling is trading at $1.6883, up 0.2% on the day as short covering and bargain hunting sets in. Last week the pound made a concerted effort to reach the $1.7 mark, but it didn’t have the legs. Today and tomorrow are quiet days in terms of economic updates from the UK, but on Wednesday we will have the latest unemployment figures, the Bank of England’s inflation report and a statement from Mark Carney. Now that UK unemployment is below 7%, Mr Carney’s language will become all the more important; I suspect he will shy away from overtly hawkish commentary, but will casually remind traders that monetary policy will not remain lax forever.

While the pound gave the important $1.7 level a good run last week, the right words from Mr Carney on Wednesday could push it through and we could see new multi-year highs.

Spot FX GBP/USD chart

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