General market theme
On Friday volatility in the money markets remained elevated on the back of the ECB meeting that really jolted the markets and as we move forward and start this new week we expect more price action. Traders will be changing their focus from the euro and start wondering how the British pound and the US dollar will trade this week as there are 2 important bank meetings scheduled. The Federal Open Market Committee will be meeting in order to decide the US monetary policy, which we expect to remain stable for now and later in the week the BoE is also scheduled to have their own meeting so volatility is pretty much guaranteed for the days ahead.
Price action highlights
The euro spent the last 24 hours of the previous week trading mostly sideways between the 1.1100 and 1.1200 levels on the back of the rally after the ECB meeting. It is clear that investors were not really impressed with what Mario Draghi proposed in order to talk down the currency and the euro’s outlook at this point still looks undecided. With the attention elsewhere this week we should expect the dollar to provide friction in the euro pair with the key levels being the 1.1100 and 1.1200 areas.
The cable continued higher on Friday and the rate has reached the 1.4400 area on the back of stronger demand for the UK currency. However as we move closer to the BoE meeting the recent bullish bias for the pound will be tested as analysts expect a bearish tone to come out of the central bank meeting given the recent decline in the PMIs and the fears of a Brexit. However for the time being the pound looks robust enough and we will need more evidence to suggest a reversal lower.
Focus of the day
At the beginning of the week the calendar is empty of any important reports and today the only tier-2 release will be the Eurozone Industrial Production levels which are not expected to dictate price action at all. Given that the more important events of the week are scheduled for later in the week we should expect some price action today though as traders will look to reposition ahead of them.
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