General market theme
Volatility in the currency markets were relatively lower over the past 24 hours as there was a lack of any fresh significant developments or market-moving reports to dictate the price action. The market’s focus remains on the US dollar on the back of Fed Yellen’s concerns about the domestic economy and with the NFP report coming up tomorrow investors are trying to weigh the outlook of the US currency. At this time the bias is bearish for the dollar and it will take an astonishingly better than expected labor report to change the sentiment at this time and analysts are expecting a better than last month’s reading but nothing too exciting.
Price action highlights
The euro edged higher yesterday reaching the 1.1350 area on the back of the continued dollar weakness but later in the day the currency corrected a bit to the downside. At this time the euro is trading slightly above the 1.1300 level and it seems that the momentum that has pushed it higher is diminishing. However today’s German Retail Sales and Eurozone inflation data are expected to print in a positive manner and that could offer support to the euro and allow it to remain around its current price range until tomorrow’s NFP report where all bets are off.
The cable also printed a fresh high yesterday and then corrected to the downside but the pullback for the UK currency was a bit more extensive compared to the euro. The bearish bias associated with the BoE rate policy and more importantly the Brexit scenario are weighing down on the pound that is trading just above the 1.4300 level this morning. BoE Governor Mark Carney will be speaking this morning and the cable’s price action hinges on how concerned he will sound about the prospects of the domestic economy.
Focus of the day
The important events of the day ahead are revolving around the euro and the pound today with the German Retail Sales and employment data along with the Eurozone inflation reading being the ones that will set the tone for the euro. As we mentioned above the pound will also be in focus as Governor Carney delivers his remarks on the economy early this morning so we need to pay extra attention to his comments.
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