Interesting price action in the majors over the last 24 hours with limited volatility in some currency pairs and increased action in others. The focus yesterday was on the Euro and the Pound and even though the first disappointed traders by not reacting to the release of the ZEW Survey the UK currency had quite a reaction to the inflation levels.
Starting with the Euro, the Single currency tackled the release of the business confidence ZEW Survey from Germany liked nothing happened. The report printed in a bearish manner with confidence at even lower levels than expected but the Single currency remained unfazed. It pulled back as low as 1.1360 during the session but managed to remain near the 1.1400 highs of recent.
We attribute this lack of reaction to the broader Dollar weakness that prevents traders from dumping the Euro in favor of the US currency, especially ahead of today’s Retail Sales report which poses risks for the US currency. If the consumer report misses its mark and prints lower than expected then we could see a further rally for the Euro that will take it above the 1.1400 barrier with the 1.1450 area being the first level of focus.
On the other hand, the Cable was rather vocal in its reaction to the inflation levels that retreated in the previous month on the back of expectations for a level performance. The UK currency dropped to the 1.5200 area within the day as inflation remains one of the key obstacles the BoE is facing towards raising rates in 2016.
However the Cable managed to correct during the rest of the day and actually rallied to the 1.5280 area where we find it this morning. There is a chance for the Cable to claw back some of its losses today ahead of the UK employment levels and the US Retail Sales report that even though analysts expect to print stable there are reasons to suggest that a lower reading is possible. Such a development should take the Cable back above the 1.5300 level in an attempt to retest the recent 1.5380 highs.
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