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Forex snapshot

US dollar weakness has seen a sharp bounce in both EUR/USD and GBP/USD.

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US dollar notes
Source: Bloomberg

EUR/USD bounces following poor German data

The regular pattern of disappointing economic data coming out of the eurozone has continued, even before equity markets are open. The latest German monthly industrial production figures, falling 4%, are the worst seen from the country since March 2009. It is becoming increasingly obvious that the weight of France is taking its toll on Germany.

The bounce seen over the last 24 hours has as much to do with EUR/USD being aggressively oversold as anything else. We could also have seen a pre-emptive move as two Federal Open Market Committee members are due to speak this afternoon. Currently the currency markets are factoring in a US rate rise before July 2015, and tonight’s comments could sway that perception. 

Spot FX EUR/USD chart

Cable returns to $1.61

Much like the euro, GBP/USD was heavily oversold and a correction was overdue. This morning will see the release of the latest monthly manufacturing and industrial production figures, both of which have struggled to impress over the last couple of years.

Currency traders will be conscious that this afternoon/evening will see Narayana Kocherlakota holding a Q& A session discussing the objectives of the monetary policy, while William Dudley will be speaking on the state of the economy in New York.

As welcome as the bounce back up to $1.61 is, this does just feel like a blip in an otherwise downward trajectory.

Spot FX GBP/USD chart

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