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Forex snapshot

The US dollar strengthens slightly following confirmation of last night’s Republican control of the senate.

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US dollar and British note
Source: Bloomberg

Cable drifting lower

Last night’s success for the Republican party was not a complete surprise, and the moves in GBP/USD have been subtle rather than reactive.

Having briefly popped its head above the $1.60 level, it is once again drifting lower. With trader’s conscious of tomorrow’s Bank of England interest rate event and the accompanying Monetary Policy Committee statement, it is unlikely we will see the GBP/USD rate move too far from here.

Before the excitement of tomorrow we are still to see the latest services PMI figures for the UK, and regardless of the improvements seen in manufacturing this is still a sizeable contributor to the general health of the UK.

Over the next 24 hours it is likely that $1.60 will continue to be a cap on the GBP/USD rate, but sentiment is unlikely to see the spot levels move too far away from it.

EUR/USD below $1.26

This morning will see the latest monthly retail sales figures for the eurozone, and expectations have been set low. Confidence has been thin on the ground as Germany’s economic data releases have started looking similar to France rather than the other way around. These figures are unlikely to give traders any reason to change their perception of the Eurozone’s inflation picture.

Tomorrow will see the latest interest rate decision from the European Central Bank, and it is unlikely to change. What traders will be hoping for is a little more clarity on how the Asset Backed Security (ABS) purchasing scheme is working, and if there is any more scope for stimulus from the ECB before the end of the year.

The short-term picture will see the EUR/USD rate remain below the $1.26 level, as once again the US dollars strength has outmuscled the euro.

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