Mike Paterson’s daily Forex brief

After the post-Merkozy statement positive vibe was somewhat dented by S&P spoiling the party we’ve seen some consolidation in the Euro ahead of tomorrow’s interest rate decision from the ECB and of course the EU summit on Friday.

It’s all relative and we’ve only seen EURUSD rally back to 1.3454 so far. We should remember that after the last summit in November we rallied to 1.4245 as markets got carried away with the rhetoric and rushed to cover short positions but this time it feels a little different. The market is still short but there seems less inclination to cover until traders see the colour of the EU money and the agreement they reach on Friday. Should it be a positive outcome then no doubt we will rally further on the euphoria of it all but anything less than action from the EU and the pressure will be back on and with a vengeance.

Throw a possible 0.25% cut in interest rates tomorrow into the mix from the ECB and it’s easy to see why markets are not getting carried away just yet. There is definitely a case for them doing so but it’s by no means certain.

Also out tomorrow is the BOE interest rate and QE decision, where both are expected to remain on hold once again.

EURGBP having failed to break down through the second key support level at 0.8520 (GBPEUR resistance at 1.1737) has now moved back up to test the 0.8610 resistance (1.1614 support again) given the stabilization in the Euro elsewhere, so GBPUSD has correspondingly failed to keep pace with the EURUSD rally. Overall the Pound has lost ground again as a level of risk-on sentiment returns and I stand by my view that we will see further deterioration in the Pound over the weeks and months ahead with the odd exception.

Forex Brief Wed

Daily FX Update

The Aussie $ has also weathered yesterday’s storm and rallied to 1.0299 v USD and 1.5161 v GBP aided by better than expected GDP data but seems to be struggling to go much higher for now while EURCHF still continues to attract a few buyers as traders believe the SNB will act again this month. USDJPY continues to be less interesting than watching paint dry at the moment, but still seems relatively well supported.

Elsewhere Gold and equities have also recovered from yesterday’s knee-tremble, and news just in shows worse than expected production data from the UK but having little immediate effect as I sign-off.

Too much going on tomorrow and Friday for traders to take any great risks today.

Today's Data:

09.30-UK- Industrial Production / Manufacturing Production

11.00-EU- German Industrial Production

15.00-UK- NIESR GDP Estimate

Interbank Rates as of 08:16 BST

Current Price

Overnight

High

Low

EUR/USD

1.3421

1.3454

1.3400

GBP/USD

1.5621

1.5639

1.5594

EUR/GBP

0.8595

0.8614

0.8588

GBP/EUR

1.1635

1.1645

1.1607

GBP/CHF

1.4437

1.4471

1.4411

GBP/AUD

1.5187

1.5252

1.5161

EUR/CHF

1.2410

1.2445

1.2400

GBP/HKD

12.1110

12.1249

12.0900

EUR/HKD

10.4091

10.4462

10.3821

GBP/ZAR

12.5145

12.5712

12.4263

USD/JPY

77.72

77.80

77.62

GBP/CZK

2.9351

2.9411

2.9212

Agree or disagree? Then please leave a comment in the box below or contact me by e-mail.

Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.
To contact Mike please call +0044 (0) 1732 700383 or email mike.paterson@economicvoice.com
The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.

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