Traders bracing for big moves in Euro & Cable

8 June, 2017

Traders bracing for big moves in Euro & Cable

After a slow start to the week, traders are getting prepared for a rough ride in the currency markets. Although Comey’s testimony has attracted most of the media headlines, we didn’t see any significant disclosures from the prepared remarks released yesterday. This explains the recovery in U.S. equities after a fall in the early hours of trading yesterday. While we cannot assume anything, a base case scenario would not be a big surprise to arise from Comey’s testimony before Congress. I think that the ECB meeting and the UK election are the risk events that will produce the big moves today. 

The Euro has been trending significantly higher for the past three months, appreciating by more than 7% against the Dollar since early March. Although this reflects a sign of confidence in the Eurozone, it’s kind of problematic for the ECB who’s been fighting deflation for many years. Reports released yesterday citing unnamed official sources indicated that the Central Bank will lower the inflation forecast for the next three years. The impact on the single currency was limited as the lower inflation projections were offset by higher growth expectations. It’s obvious we’ll not see any change in monetary policy today, and the key driver to the Euro will be the risk assessment on the economy. If the ECB amends its risk assessment to “neutral” from the current “downside”, EURUSD could easily break above 1.13 and move towards 1.15. If the ECB disappoints and Mario Draghi doesn’t reflect confidence in the economy’s recovery, the EURUSD may be headed for a sharp selloff.

Sterling traders seemed to be pricing a May victory in today’s snap election. GBPUSD appreciated 0.4% yesterday as latest opinion polls indicated that a Tory majority is still on the cards. The higher the margin Conservatives win by, the more negotiation power May will have on Brexit terms, and the higher the Pound goes from here. I think that we can easily see a move in excess of 200 pips to the upside or the downside depending on the outcome and how much it deviates from current expectations.  


Source link  
Risk appetite returns as shutdown ends

The rally in Asian equities resumed on Tuesday taking the lead from Wall Street after U.S. government shutdown came to an end on Monday. Although...

Global equities hit by bearish pressure

Global markets took a sharp U-turn as the markets were in turmoil on the back of large crypto currency sell offs caused by regulation fears and a crackdown...

Dollar stabilizes after four days slide

The greenback’s sell-off paused early Tuesday after touching its weakest level since January 2015. Traders have been selling the buck across the board...


US equities hit another record high

The US markets have continued their hectic pace this year as the S&P 500 reached new highs on the back of economic figures. These figures showed...

Fixed income markets to dominate FX

The outstanding performance for equities which sent many major indices to record highs may have just paused. Asian stocks were trading broadly lower...

How longer the tired bull will keep running?

Led by Wall Street, global equity markets continued to enjoy one of their best starts in eight years. The Japan’s Nikkei 225 marched to a new 26-year high...


Critical week for dollar after a fragile start

After having the worst annual performance since 2003, the dollar continued to struggle in the first trading week of 2018. The dollar index fell to...

Robust economic growth

Equity investors across the globe are finding no reasons to take profits after an excellent performance in 2017. Asian stocks are trading at record highs after...

FOMC minutes - Will dollar bulls attack?

Investors kicked off 2018 on a positive note sending U.S. stocks to fresh highs on the first trading day. The optimistic approach on day one was...

  


Share: