A quiet start for the currency markets yesterday in a week that is expected to be extra busy with important reports and developments from both sides of the Atlantic. However yesterday’s price action was rather smooth and we didn’t see the excess volatility we expect for the rest of the week.
The most active instrument from the ones that we monitor daily was the Pound against the US Dollar that illustrated some instability after the release of the UK Manufacturing PMI. Further price action is expected down the road for the Cable as the week is filled with important events: the release of the Construction and Services PMIs but more importantly the BoE meeting on monetary policy and the unusual press conference to follow it.
The Cable spent the day trading either side of the 1.5600 level but we believe that the bias at this time is bullish and even though yesterday the price action was mostly negative we expect further gains for the UK currency this week. The PMI reports are expected to print stable if not better than last month and the BoE policymakers are warming up to the idea of raising rates in early 2016. If Governor Carney shares this bullish bias with the rest of the world on his press conference on Thursday then we should see a strong performance for the currency this week.
At the other end of the spectrum, the Euro was relatively quiet over the past 24 hours trading slightly lower against the US Dollar. The Euro ended last week with a spike higher that caught some investors off guard and thus trading yesterday was rather careful and reserved. The Single currency didn’t seem to care about reports coming in from Greece that its stock market on its opening day after a few weeks of being closed dropped a staggering 23% on its opening minutes.
The Euro seems fragile at this time as we mentioned in our previous reports, the bearish outlook of the Single currency is due to the headwinds that the Greek government will face trying to come to an agreement with its creditors that will require more reforms and more measures. At the same time we expect a solid performance for the Dollar hence the combined forces are most likely bound to drive the Euro lower. Next support lies around the 1.0900 lows of last week.