Plenty of news…….No action
So, who or what is driving currency markets at the moment?
Very little it seems.
We have seen plenty of technical levels come into view in the past few hours. 1.3020 for Eur, 1.60 for Gbp and 80.00 for Jpy. Each has been repelled as the market lacks conviction right now and is therefore content to trade within ranges.
On the fundamental side, we have seen Japan edge closer to recession and therefore further monetary stimulus, Spanish regions downgraded and stronger than expected mortgage approvals in the U.K.
Risk appetite continues to be stimulated by the better data continuing to emanate from the U.S.
So, again what is going to drive currencies to strengthen or weaken?
The fundamental offerings seem to be mere background noise. Any news on Spain other than a request for a bailout won’t excite markets. An announcement of further stimulus in Japan will probably cause the Jpy to strengthen conversely as it is well priced into the price. What of the U.K.? To a certain side-lined by the events in Europe, Britain continues on its merry way having adopted policies that have, so far seen inflation come back under control and the currency rise over the year from a low of around 1.5250 on the year.
From what we have seen in the past, the longer a market continues to be hemmed in, the more violent the breakout tends to be. The question is what will be the catalyst. Has the rise in the Euro topped out or are still going to see an attempt to move higher through 1.3280 and onwards towards 1.35?
What do we have to look forward to? The U.S. election is the major event coming up but also there will be a further EU summit. The next ECB Council meeting and press conference is on 8th November, two days after the U.S. Election that should be a week to remember! That will be preceded on Nov 2 by NFP in the U.S where revisions to previous releases will be heavily scrutinized.
In the meantime over the next week for so it is likely to be rangy trading for the majors with a possible bias lower for the Euro given the lack of positive news and the strength of the resistance that has formed over the past week or so. Sterling seems to be gaining a bid bias and above 1.5970 should see this continue. The Eur/Gbp cross looks a bit vulnerable to a correction but doesn’t look likely to break .8000.