Forex snapshot

US dollar strength continues to dominate rates against both the euro and the pound following yesterday’s strong GDP figures.

Pound and dollar currency
Source: Bloomberg

GBP/USD eyes $1.66

A lack of UK-focused economic data today will not help the GBP/USD bounce back above the $1.66 level and considering the trend for improving US economic data, this will probably prove to be unhelpful too.

The only plus point for those long of GBP/USD is the fact that this will be a long weekend in the US as markets will be closed on Monday to celebrate Labor Day. Considering the collapse we have seen in GBP/USD over the last seven or eight weeks, and the fact we are seeing the rate just beginning to move out of oversold territory, a bout of profit-taking could be on the cards and might give cause for the GBP/USD to creep back above the $1.66 level.

EUR/USD expected to fall

EUR/USD is continuing to trade below $1.32 as traders wait pensively for the latest set of eurozone inflation figures. It is expected to fall even further down to 0.3%. Considering the set of inflation figures we saw out of Germany yesterday there will be few holding much hope that this can improve.

When speaking at the Jackson Hole meeting a week ago, European Central Bank president Mario Draghi announced that the chances of eurozone stimulus were high. The following days saw data from Germany somewhat contradict this outlook, creating yet another confusing picture.

As it seems unlikely that eurozone economic data will offer much of a reason to see a bounce the EUR/USD pair will, like GBP/USD, be hoping that some good old fashioned profit-taking ahead of a long weekend kicks in.

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