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Currency Market Analysis

Aug 16, 2019 | Currency Market Analysis

Global Themes

Sterling rallies to week high
- Sterling snaps losing streak
- Dollar holds onto gains

GBP

Sterling snaps losing streak
Sterling could see the week out on a positive note against the US Dollar and the Euro. The pound rallied for most of yesterday as better then expected UK retail sales gave Sterling a much needed relief. GBP/USD and GBP/EUR trade close to 1-week highs this morning. 

Retail sales m/m and y/y beat forecast with the figures coming in at 0.2% vs -0.2% and 3.3% vs 2.6% respectively. Economic data has not been the focus for traders for a while with politics dominating headlines. However, with summer recess going on markets traded how they would have prior to Brexit. No economic data today could see a quiet day of trading with minimal market movement.

GBP/USD has managed to recapture $1.21 and could continue its rise as market participants trim their positions to sell the pound. GBP/EUR has climbed close to 2% since Monday trading above €1.09 this morning. The move higher has helped snap a 14 consecutive weeks of losses; the worst run the currency pair has even seen. 

USD

Dollar holds onto gains
The US Dollar index rallies to month highs this morning after positive US retail sales beat forecast. Global tensions are also helping the dollar stay afloat with the protests in Hong Kong becoming a major focus for investors and could further complicate the US- China trade war. 

The dollar is behaving like a safe haven currency at the moment which sees demand remain high. The index, a measure of the dollar against a basket of 6 currencies, is trading just above the 98 handle. However, analysts still forecast an interest rate cut from the Federal Reserve before the year is out with a Reuters poll forecasting a 56% probability a 25-basis point cut in September’s meeting. Plus a negative outcome from the Sino war could see selling of the dollar as well. 

EUR/USD falls below the $1.11 handle this morning back towards the year low of $1.1025. The EUR/USD trend maintains its negative direction. Support at the year low could be expected however a break lower could worsen the outlook for the currency pair. 


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