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Daily News from Senior FX Analyst – Samuel Allen

Record bank profits have helped to spur the pound onto a multi month high against the Dollar and a 5 week high against the Euro. The markets might see further consolidation in the lead up to the bank of England’s meeting this week where Mervyn King is expected to make an accompanying statement to reinforce his neutral stance on interest rates. It is unlikely that we will see any change in interest rates but there might be mention of further quantitative easing which will be revealed in the minutes released mid August.

The pound has risen now for around 10 consecutive days against the Dollar driven by both a return to risk appetite and a positive UK outlook. Today the rate rose over 1% to the resistance level 1.5875 GBP/USD which acted as January’s support and the 61.8% Fibonacci retracement level. Traders might use this as an opportunity to exit some of their long positions so we might see a slight pull back.

Euro traders have been buying up any dips against the USD recently and this has helped the EUR/USD rate to rise to its highest level since May this year. A close above the 1.3100 EUR/USD level could signal a medium term rise to the 1.36 April high.

All eyes will be watching the Non-farm payrolls figure from America this Friday where an expected -120k figure could easily be too conservative and if the state of the American jobs sector does prove to be worse than estimated then we might again see traders buy the Dollar again.

High yielding and commodity currencies (AUD/ZAR/CAD) have seen little movement so far this week. The Ozzys are expected to hold their interest rate at 4.5% in their meeting this evening; a rise might see the AUD strengthen.