Forex snapshot

French political turmoil has forced EUR/USD lower, while GBP/USD has managed to halt its descent.     

Francois Hollande
Source: Bloomberg

EUR/USD dropped 750 pips since May

France has fallen a long way, having once stood shoulder-to-shoulder with Germany in leading the eurozone forward. This weekend has seen confirmation that French industry minister Arnaud Montebourg has left his position following his public questioning of Francoise Hollande’s policies. That things have come to a head is hardly surprising, as the back drop of French economic data over the last twelve months has rarely done anything other than disappoint.

At the end of last week I was talking about the EUR/USD breaking below the $1.33 level; I am now referencing its break below $1.32. Since the beginning of May, the currency pair has dropped over 750 pips and, as welcome as a softening euro will be to European manufacturers and exporters, there is a lack of control on its movement. We are now looking back to the intraday lows of $1.31 in September 2013 to offer EUR/USD some support.

GBP/USD takes break from move lower

The UK has just enjoyed a long bank holiday weekend (or as much as is possible with all yesterday’s rain) and GBP/USD has enjoyed a momentary lull in the almost relentless move lower seen since the beginning of July. The last seven weeks have seen the currency pair drop by almost 600 pips as the debate over the timeline for both the UK and the US increasing interest rates has raged on.

Comments from US Federal Reserve chair Janet Yellen last week were far from conclusive, but the general consensus that the pace of the US recovery has once again picked up and is improving more quickly than the UK’s has helped pile on the pressure to GBP/USD.

The next level of support could well materialise around the late-March $1.6460 lows, as GBP/USD remains heavily oversold.

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