8 Dec 2014
Cable sets new correction low on USD strength – KBC
FXStreet (Barcelona) - The KBC Bank Research Team notes that GBP trading was at the mercy of price swings in other major currency cross rates on Friday, and will follow the USD performance today in absence of any eco data in the UK.
Key Quotes
“On Friday, GBP trading was at the mercy of the price swings in the other major currency cross rates. Early in the session a sell-off of the yen triggered heavy buying in the (less liquid) GBP/JPY cross rate. This squeezed cable higher, even as the dollar was well bid across the board. Cable drifted higher in the 1.56 big figure.”
“The reaction of EUR/USD and cable to the payrolls was more or less in line. EUR/GBP briefly dropped to the 0.7840 area, but almost immediately returned to pre-payrolls levels (0.7870/80 area).”
“Today, there are again hardly any eco data in the UK. Cable will probably follow the broader USD performance. The pair sets a new correction low at 1.5556 this morning. EUR/GBP recently traded with a cautious downward bias, but the 0.7800/0.7750 area still proves to be a tough support.”
“This week, the UK eco calendar is moderately interesting. Next week’s BoE minutes might be the next trigger to inspire a directional GBP move. As is the case for the Fed, the BoE minutes might indicate that the majority of the BoE is coming closer to hit the start of normalisation somewhere in the middle of 2015. This should provide decent support for sterling against the euro. We don’t see much reason for a sustained rebound back beyond 0.80.”
Key Quotes
“On Friday, GBP trading was at the mercy of the price swings in the other major currency cross rates. Early in the session a sell-off of the yen triggered heavy buying in the (less liquid) GBP/JPY cross rate. This squeezed cable higher, even as the dollar was well bid across the board. Cable drifted higher in the 1.56 big figure.”
“The reaction of EUR/USD and cable to the payrolls was more or less in line. EUR/GBP briefly dropped to the 0.7840 area, but almost immediately returned to pre-payrolls levels (0.7870/80 area).”
“Today, there are again hardly any eco data in the UK. Cable will probably follow the broader USD performance. The pair sets a new correction low at 1.5556 this morning. EUR/GBP recently traded with a cautious downward bias, but the 0.7800/0.7750 area still proves to be a tough support.”
“This week, the UK eco calendar is moderately interesting. Next week’s BoE minutes might be the next trigger to inspire a directional GBP move. As is the case for the Fed, the BoE minutes might indicate that the majority of the BoE is coming closer to hit the start of normalisation somewhere in the middle of 2015. This should provide decent support for sterling against the euro. We don’t see much reason for a sustained rebound back beyond 0.80.”