General market theme
Limited price action in the money markets at the beginning of the week with no fresh news from any sources which meant that the major instruments traded within their previous ranges ahead of this week’s important events. The focus this week will move away from the US and will mostly fall on Europe and the UK starting today with the release of the UK inflation figures and the ZEW Survey. Both reports are expected to print in a bearish manner revealing the negative sentiment in the Eurozone and Britain as well and should expectations be met the euro and the pound will take a hit. With both the ECB and the Bank of England considering additional easing measures to support their domestic economies their currencies’ outlook is in doubt and we could see this in the upcoming price action in the next few sessions.
Price action highlights
The euro managed to remain afloat yesterday trading firmly above the 1.1050 level in light of no fresh news or reports from anywhere but as we discussed above the bias is negative. The ECB is preparing to pull the trigger again in another round of easing and such expectations are putting the euro under pressure and if today’s ZEW Survey confirm the bearish views shared by economists then the euro should push to the downside. The 1.1020 lows should be the first stop for now as it will take sustained selling pressure for the euro to break below 1.1000 which looks difficult for now.
The cable edged higher yesterday in an attempt to correct after Friday’s strong move lower but we believe that this correction will be short-lived. The bias in the currency remains bearish and today the upcoming inflation figures’ report is expected to show a pullback in prices’ growth which should put the pound under fresh pressure. The UK currency is trading just above the 1.3200 level at this time but should the report confirm the bearish bias then the 1.3150 lows might be broken clearing the path for the 1.3100 area.
Focus of the day
The UK inflation levels and the Eurozone ZEW Survey report are the two important events of the day ahead as the calendar doesn’t hold anything else of any importance today. With both reports expected to print in a bearish manner we could see both the euro and the pound coming under pressure today as the dollar takes the backseat for the time being.
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