Forex snapshot

David Madden looks at how recent economic data has affected the EUR/USD and GBP/USD pairs.

Euro slides after IFO report

The euro is off versus the US dollar as German business sentiment declines.

The EUR/USD is trading at $1.3621, down 0.25% after the German IFO business survey showed a drop in confidence in May; the decline was even larger than what the markets expected.

This morning Italy revealed a 0.2% drop in retail sales in March, which was below expectations. The soft economic data from the eurozone is adding fuel to the fire that the European Central Bank will engage in monetary easing next month.

As Alastair McCaig noted, the EUR/USD is below the 200-day moving average which is a bearish indicator. Because the euro is in oversold territory versus the US dollar, we could retest the $1.37 mark before breaching the $1.36 level.

Spot FX EUR/USD chart

Sterling slips on profit-taking

The pound has lost ground as traders lock in their profits from this week’s gains.

The GBP/USD is trading at $1.6845, down 0.15% on the day as the pound looks to have run out of momentum. The currency pair hit $1.69 twice in the past three trading sessions but it didn’t have the strength to test it again. A lack of economic data from UK gave traders a reason to take profits.

The US will announce new home sales at 3pm today and the expectation is for an increase of 42,000 in April. If the report is stronger than expected it could drag GBP/USD towards the $1.68 level.

Looking ahead to next week, the UK will announce mortgage approvals on Tuesday. Mark Carney has already voiced his concerns over a housing bubble, and if the report exceeds estimates we could retake the $1.69 level.

Spot FX GBP/USD chart

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