Lack of consistency has been the theme of the market over the past 24 hours for the major instruments we monitor in our daily report. The focus has been on the release of the Production levels’ report from the UK while traders also keep their eyes peeled for any developments that could offer some insight on Fed’s rate hike intentions.
At the same time though the attention remains on the UK as today the Bank of England will have their monthly meeting on monetary policy and even though we expect no changes in policy it would be interesting to find out whether those members asking for a rate hike on the Pound continue to do so. The performance of the domestic UK economy has been sub-par over the past few weeks and if it hadn’t been for Dollar’s weakness to capitalize on those losses the Cable would have been trading far lower.
Talking about the Cable, the currency pair traded lower yesterday coming off its 1.5400 highs and tested the 1.5350 area where it found enough support to stop its decline. The release of the Manufacturing and Industrial Production levels yesterday did print lower across the board as we warned since the domestic economy has slowed down during the previous month.
However Cable’s reaction to the release has been far than impressive, the pair merely moved after the release and certainly didn’t translate this bearish sentiment into any losses. We believe that it’s investors’ reluctance to bet in favour of the Dollar that didn’t allow the Cable to move lower yesterday even though the fundamental drivers justify it. Today’s BoE meeting though might be what the Cable needs to retreat lower and look for the 1.5200 area.
The Euro at the same time trade around the same area for the entire day swinging higher and lower around the 1.1200 level. The inconsistency in its performance has to do with the lack of follow-through after the technical break of the sideways formation the Single currency had previously formed. It is quite weird to see such an inconsistent performance at this time however we need to remain cautious as the Dollar is showing signs of weakness and that could affect all the major currency pairs.
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