We saw a renewed round of hawkishness of global central banks on the back of still elevated inflation. The bank of England surprisingly raised interest rates by 50bp last week, instead of an expected 25bp-move and the European Central Bank indicated more hikes to come. The only exception was the Federal Reserve, which left rates unchanged this month but reiterated a hawkish stance.
This week starts with three days of ECB forum on Central Banking with speeches from ECB President Christine Lagarde. In terms of inflation, it might be worth to take a look at the Euro area inflation data for June and the U.S. PCE price index, both are due for release on Friday.
From a technical perspective, we saw sharp corrections in our three trading instruments.
The euro corrected towards 1.0840 against the U.S. dollar after euro bulls proved unable to push the pair significantly above the 1.10-hurdle. As long as the euro remains below 1.1050, we favor a bearish bias with lower targets seen at 1.0650 and 1.05.
GBP/USD – The perfect correction?
The pair has stopped its correction exactly at the lower ascending trendline of its latest upward trend channel. If the bullish trend remains intact, we would now see a further leg up towards 1.30 but if 1.27 breaks to the downside, the focus shifts to a break of the lower support at 1.26.
The index sharply tumbled and gave up all of its previous gains after hitting its new high at 16432. There is a crucial support area around 15600 and bulls might want to defend it. However, we now brace for a short-term trading range between 16100 and 15700.
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