Yesterday in our report we were discussing the recent pickup in the volatility of the major currency pairs and money instruments and how it was expected to continue and actually increase and it turns out that we hit the nail right on the head. Over the past 24 hours we’ve seen some major price action on the Euro and the Cable while the FTSE 100 was not far behind in terms of volatility.
A string of fresh news from the Euro-zone and the US provided the fundamental spark for the major currency pairs to pick up some momentum and the interesting thing to note is the direction they took. Both the Euro and the Pound posted important gains against the Dollar yesterday on the back of better than expected reports from the Euro area while the US posted weaker than expected figures again.
As a result the EUR/USD and the Pound climbed aggressively higher yesterday with the Single currency especially picking up a 2% advance. The stronger than expected Eurozone inflation levels and the retreat in the US Factory Orders sent the Euro to 1.1000 initially at the beginning of the day but later on the currency rallied to 1.1200 as the fresh figures from both regions diverged.
There will be more news for the Euro the following days starting with this morning when the ECB will host a press conference for Mario Draghi after the release of the central bank’s key rate decision. His comments on the expected economic sentiment in the region along with the Retail Sales and PMI reports scheduled for release today will decide whether the Euro can hold on its recent gains or whether it will give back some of the ground it gained.
Elsewhere the Cable also rallied yesterday although to a smaller degree than the Euro. Nevertheless the UK currency came off its 1.5200 lows to trade to 1.5360 this morning when the Construction PMI report printed even better than expected. The Cable also benefited from Dollar’s current weakness and it actually stands to gain even more today if the Services PMI levels print in a positive manner. Later in the day the release of the ISM Non-Manufacturing report from the US will be another chance for the Cable and the Euro to extend their gains if it reveals further weakness for the US Dollar.