GBP/USD has come off recent highs and is bearish to the downside at present. The pullback that we’ve had over the past week is due to broad dollar strength and some disappointing data out of the UK. The UK data was in line with expectations however due to previous data outperforming market expectations the market needs to see better than expected results to act as a catalyst to push GBP/USD higher. In short, the market needs to see a continuing strengthening of the British economy to push above recent levels. We may see some recovery attempts throughout the remainder of July and into August. What have we got out this week in terms of UK data that may give us that nudge higher? The answer? Not much unfortunately. We’ll need to look across the pond to our American friends and take the lead from as their economic reports are going to be the drivers for GBP/USD this week. Should we see any disappointing releases then this could give the impetus to push Cable back up to key resistance levels and break through and consolidate higher. I suggest placing market orders at key levels to take advantage of any intraday moves. Please contact myself or one of the Trading team at Aston to discuss applicable levels and time frames to implement these.GBP/EUR is, and I’ve not said this for a long time, the more exciting currency pair at the moment. We’ve seen a gradual, albeit painfully slow, move higher over the past few months however last week gave us some swings higher, lower, then higher again. I expect us to push another leg higher in upcoming trade. With EUR/USD coming under increasing pressure (are we heading back below 1.30?) this should give GBP/EUR the bump up it requires. As stated above, we’re limited on data releases from the UK so we’ll be looking to the Europeans and their data/speeches/releases to give us some direction. I would suggest Wednesday and the release of the Consumer Price Index will create some volatility as will unemployment data from Germany on Thursday. Please place any market orders prior to Wednesday on GBP/EUR. This week will give us some clear idea if GBP/EUR is going to retreat and consolidate to the downside or we’re going to break higher. I believe we’ll push higher hence it’s important to take advantage of these sudden spikes as they normally occur and then profit taking takes place and we gradually drop off a little.
The other data of note, and what will affect GBP/USD in particular this week along with movement on EUR//USD is the releases from the US. As always, we have the NFP figure (Non-Farm payroll) released on the first Friday of the month so this always creates movement however the key day this week will be Wednesday with the Fed Interest rate decision followed by the MBS (Mortgage-Backed Securities) purchase program - the general slowing of this program links to the general improvement of the US economy. However, the main event is of course the Monetary Policy Statement from the Fed where any comments from the FOMC will be keenly listened to. Have market orders in place prior to 5PM on Wednesday before these announcements occur.
With ongoing Geo-political events seemingly part and parcel of the economic news at present (Russia/West/Sanctions, Gaza/Aviation disasters) then global volatility is set to continue in currency and equity markets.
Please contact a member of the Aston Team to discuss a strategy for the summer months.
If you have any questions please do let us know.
Have a great week.
Written by Liam Alexander