Currency Feed – Friday 15th September

Bank of England propels pound to year-long high The Pound consolidated its gains today, following yesterday’s key Bank of England interest rate decision and the hawkish rhetoric that followed. This sent Sterling to new yearly highs against the Dollar and to a level not seen against the Euro since July 2016. The Bank of England […]

15th September 2017 | Miles Eakers

Bank of England propels pound to year-long high

The Pound consolidated its gains today, following yesterday’s key Bank of England interest rate decision and the hawkish rhetoric that followed. This sent Sterling to new yearly highs against the Dollar and to a level not seen against the Euro since July 2016.

The Bank of England held interest rates at current levels but assured market that there was scope for stimulus reduction in the coming months. This comes following increased inflationary pressure with inflation rising to multi-year highs of 2.9% on Monday. The Bank also stated that inflation is likely to break above the 3% level in October.

The US Dollar remained fairly stable as North Korea undertook another missile test, this time firing over Japan and demonstrating that their missiles would be able to reach Guam. Core retail sales at 13:30 today will likely be the source of the greatest movement in the Dollar today, expectations are for Core retail sales to show only 0.1% growth.

The Dollar sold off yesterday afternoon, as Trump stated that he was close to a deal with Democratic congressional leaders on protections for illegal immigrants brought to the US as children, astounding fellow Republicans again whilst alarming Conservative supporters. A border wall will reportedly not be built, despite rhetoric throughout his election campaign suggesting otherwise.

Despite tensions rising again in the Korean peninsula, equity market moves were fairly muted. News that Pyongyang had fired another rocket, this time over Japan, did see markets spike lower before regaining most of the losses. US officials had expected North Korea to retaliate after the UN passed a new package of sanctions targeting the rogue nation state. European equity markets are expected to open lower this morning with the FTSE set to drop 7 points and the DAX to drop 14 points.

EUR/USD $1.1922 (+$0.0004)

EUR/USD did little overnight, consolidating the solid bounce from near $1.1840 levels yesterday. The shared currency has found some support from the latest North Korean missile launch, which has kept the pair above the $1.1900 handle. However, it remains to be seen how long it can remain above that level, amid rising Fed rate hike expectations and more tier 1 releases from the US today that could further boost the bets for a December hike. For the record, US retail sales, industrial production and Michigan consumer sentiments are on tap. From a technical view, today’s high at $1.1929 may offer some resistance ahead of Wednesday’s high at $1.1994. On the downside, we look for support at today’s low of $1.1899 and Thursday’s low at $1.1836.

GBP/USD $1.3427 (+$0.0032)

GBP/USD surged to its highest level since the Brexit vote at $1.3450 in response to yesterday’s hawkish message from the BoE, with the central bank suggesting that the MPC sees scope for stimulus to be reduced in the coming months. Looking ahead, nothing scheduled data wise in the UK today, but BoE policymaker Vlieghe – the most dovish MPC member – is scheduled to speak. In terms of technicals, we look for resistance at the July 15th (2016) high of $1.3480 followed by the June 30th (2016) high at $1.3495. On the downside, today’s low at $1.3379 and Wednesday’s high at $1.3328 are in focus.

USD/JPY ¥110.74 (+¥0.52)

USD/JPY dropped like a rock, in the wake of the latest North Korean missile launch, which passed over northern Japan. The pair touched an intraday low at ¥109.54 on the haven bid but has since spent the rest of the Asian session climbing back and is currently holding around ¥110.70. Attention now turns to today’s US docket that is headlined by August advance retail sales, which could further boost the bets for a December hike from the Fed. In terms of technicals, the August 4th high at ¥111.04 and the July 28th high at ¥111.33 may offer some resistance while on the downside, today’s low at ¥109.54 and Tuesday’s low at ¥109.23 are in focus.

GBP/EUR €1.1265 (+€0.0027)

GBP/EUR is hovering around two-month highs at €1.1276 in the aftermath of yesterday’s hawkish message from the BoE, which showed policymakers’ broad consensus that some withdrawal of stimulus would be appropriate in coming months. Looking ahead, the Eurozone space sees ECB policymaker Lautenschlaeger’s speech and July trade balance data, while the UK space has a speech from BOE dove Vlieghe on tap. In terms of technicals, we look for resistance at today’s high of €1.1276 followed by the July 20th high at €1.1320. On the downside, today’s low at €1.1223 and Tuesday/Wednesday’s highs at €1.1131 are in focus.

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