General market theme
Over the past 24 hours the focus in the currency markets has been on the euro in light of the release of the ECB minutes from their last monetary policy meeting and also Mario Draghi’s speech in public. The consensus among analysts was that the ECB President would attempt to talk down the euro that has seen significant gains over the past few weeks but the price action in the single currency probably disappointed them. Mario Draghi avoided making any reference in the currency rate and the content of the minutes was as bearish as expected hence there was nothing too exciting in the way the markets traded yesterday.
Price action highlights
The euro came under some pressure especially early in the morning when the European markets opened as traders were bracing for a potential correction to the downside on the back of Draghi’s remarks so the 1.1450 highs were abandoned. The decline drove the euro down to the 1.1350 area where the 200-period moving average was positioned but the lack of any significantly bearish comments from Draghi and co. didn’t push the single currency any further to the downside. As long as dollar remains on the backseat and euro holds above the 1.1350 area of support we believe that the euro will continue its current sideways pattern and with no news or report scheduled for release today we should expect limited price action.
The cable remained weak yesterday but not to an excessive degree and the initial decline in the early morning hours struggled to find any follow-through and the UK currency spent the rest of the day looking for support. The pound dropped below the 1.4100 support as soon as European markets came online but found support ahead of the 1.4050 area and the rest of the day was a directionless price action between 1.4050 and 1.4100. Today the release of the Industrial and Manufacturing Production reports could provide some friction and expectations are set for a bearish reading.
Focus of the day
The only piece of important news today comes from the UK as the release of the Industrial and Manufacturing Production levels is bound to be followed closely by traders especially given the lack of anything else to trade upon. Analysts are calling for a correction in both reports and a lower reading could put the pound under pressure early in the morning but in terms of news or developments the rest of the day is virtually empty apart from a UK GDP reading in the afternoon.
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