The US Dollar remained the currency in focus yesterday as the US currency extended its gains against its peers on the back of the FOMC meeting on Wednesday. As we explained in detail in our previous report the Dollar was lifted by the press statement after the Fed meeting where the policymakers expressed their satisfaction about the progress of the domestic economy and left a rate hike in September still an option on the table.
There were some fresh reports yesterday that in any other case would sound mixed for the Dollar but in the aftermath of the Fed event the currency continued gaining even though the numbers reported yesterday were not as strong as expected. It is only natural for the Dollar to move higher as investors are now positioning themselves for the possibility that the Fed will raise its key interest rate in September. At the same time further weakness in the Euro allowed the Dollar to extend its gains while a volatile Pound held its own against the US currency.
The Euro remained on the backseat for yet another day as the recent rise of the Dollar and fresh news from Greece weighed down on the currency that reached the 1.0900 support. While the Dollar is receiving more support as we mentioned above the news from Greece reiterate how complicated a solution to the Greek problem is.
With the IMF repeating that they are not prepared to participate in another program without some kind of debt relief or restructuring and Greek PM Tsipras facing opposition voices within its own party a permanent solution is still far away. We could see a bounce from the 1.0900 support today but the sentiment remains bearish and any uptick should be treated as an opportunity to sell higher.
The Cable on the other hand remained volatile as usual but was able to remain relatively afloat as the Pound managed to hold its own against the rising Dollar. Even though the currency pair dipped below the 1.5600 area it seems that there is enough demand to keep it well bid in expectation of next week’s reports.
The coming week will be an important one for the UK Pound as a host of important reports will be released and we’re bullish over the currency’s outlook. For the day ahead we expect limited price action as there are no UK-related reports scheduled and today the focus will be on the Euro most likely.
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