Forex snapshot

Currency markets wait to see if UK economic data can improve sterling’s performance against the dominant US dollar, while the euro continues to slide.

Bank of England
Source: Bloomberg

Dollar remains dominant against pound

Within the first couple of hours of today’s session, currency traders will be able to digest the latest UK current account and final quarterly GDP figures. GBP/USD has stabilised in the last 24 hours, but still has some way to go in order to claw back all of the ground that it lost against the US dollar.

Over the last couple of years the Bank of England’s long-term outlook has been clear and has encouraged markets to move higher. This stable outlook has now been questione, however, as BoE comments have painted a confusing picture regarding the timeline for interest rate rises. This confusion has coincided with the US economic picture improving and a reversal of that base-building.

The US dollar remains the dominant currency and, until the economic data warrants a rethink, looks likely to keep GBP/USD at or around current levels. 

Current bearish trend in EUR/USD to continue

EUR/USD has now dropped by more than 1,300 pips since its intraday highs at the beginning of May; this is an almost 10% fall in a five-month period. This move, with only a couple of moments of respite and no discernable correction, would normally have traders hunting for support.

From a technical point of view, arguments for buying EUR/USD could been made on a number of occasions during this period; however the fundamentals have only ever looked bleak. This morning will see the eurozone inflation figures announced, along with unemployment levels. The latest efforts to boost the eurozone’s recovery in the form of targeted LTROs have not had enough time to fully settle in. Without this offering the markets confidence, it is unlikely we will see the current bearish trend in EUR/USD change.

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