Volatility and a lack of direction was the market theme during the past 24 hours for the major instruments we monitor in our daily report and with a number of developments and important reports released yesterday it seems only natural. Traders were hesitant to pick a side in most cases as there are more reports coming our way this week while the Greek issue still remains on the front pages.
Yesterday the focus remained on Greece that is scrambling to pass the required reforms through its parliament in order for the Eurozone to release its aid package and it still seems a tough thing to do. This difficulty was also reflected on the release of the ZEW Survey yesterday that took a steep dive as analysts are bearish over Eurozone’s outlook in the medium term after the division that took place over the Greek issue.
As such the Euro remained under pressure and any early attempts to correct higher were quickly subdued as the currency ended the day around the 1.1000 level. There are no reports scheduled for release from Europe today but the Greek parliament will vote on the required reforms so we could expect further volatility on the back of this result.
At the same time the Euro will be sensitive to Dollar’s flows today as Fed boss Janet Yellen will be delivering her semi-annual testimony to the House Financial Panel and her comments are bound to take a toll on the Dollar. Expectations are set for Yellen to remain optimistic over a rate hike until the end of the year but we believe that December seems more likely rather than September. If the Fed Chairwoman prefers to remain non-committal ahead of the committee then her hesitation might drive Dollar lower across the board.
The Cable was also in play yesterday and will continue to attract our attention today as well. Yesterday was the release of the inflation levels that printed in a bearish manner but luckily for the British currency BoE Governor Carney offered his support. The key policymaker stated that “the time when interest rates will rise is moving closer” and the Pound instead of moving lower on the lower inflation reading rallied to the upside.
Today the release of the employment-related data is expected to keep the Cable in action and further bullish data could allow the UK currency to continue moving higher. Having traded to 1.5650 over Carney’s comments next stops for the Cable could be around the 1.5700 and 1.5750 levels.