GBP/USD continues to squeeze higher

The second day of testimony from Federal Reserve chair Janet Yellen has seen GBP/USD pushed higher following a feisty confrontation.

Sterling
Source: Bloomberg

Tension over Fed rate rise

The second day of questioning from the House Financial Services Committee and Ms Yellen saw a more pronounced conflict of interest between the two. The house frequently directed questions towards when the Fed would start raising interest rates to which Ms Yellen became increasingly adamant that it would not be unduly coerced into action. Ironically the Republican-led house has probably proven to the currency markets how reluctant the Fed is to go charging into an interest rate raising phase without a more convincing economic argument.

GBP/USD has now been pushed through the 100-day moving average and looks set to move up to the $1.5600 region. Breaking through this area will be considerably more difficult especially as the currency pair is moving into overbought territory.

Greece gets window of opportunity

Confirmation that Greek reforms have been confirmed by the eurozone finance ministers has paved the way for the €172 billion bailout to see Greece through the next four months. This window of opportunity will enable the Syriza government time to push through policies and work on further cost-cutting and tax increases. Currency markets have become rather blasé to grandiose plans for change as the last five years have seen less progress than had been hoped for coming out of Greece.

It is debatable how much more change should be expected in the next four months. As ever this is a template that has become clear due to a focus on Greece but it could be an accusation that could be put to several other member nations.

Regardless of changes on the eurozone landscape the lateral moves in EUR/USD continue. This of course is a form of correction and has seen the currency pair move out of the heavily oversold territory that it had spent so long in. As the 50-DMA continues to fall ever closer to the current spot levels this might ultimately be the catalyst for further selling pressure on EUR/USD.

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