The euro and pound rose to their highest levels in over two years amid Brexit hopes and a weakening U.S. dollar.
The euro briefly rose above 1.22 for the first time since April 2018 but could not hold onto its gains in a first bullish test. Today, we see the pair again above 1.22 which is why we anticipate further gains. A next hurdle comes in at around 1.2230 and if the euro is able to overcome that small obstacle it could be primed for a test of 1.23. A current support is seen at 1.2140.
Sterling rose to a high of 1.3555, its strongest level since May 2018 but corrected some gains before stabilizing above 1.35. Traders expect further gains amid optimism that the U.K. and the EU are close to strike a last-minute deal.
The focus will be on today’s Bank of England monetary policy decision but no changes are expected which is why the market’s reaction could be muted.
The U.S. dollar on the other side was broadly lower before yesterday’s FOMC statement but gained some traction as the Fed statement neared. Fed Chair Jerome Powell cooled any hawkish expectations in the news conference and stated that markets will receive warning before the Federal Reserve makes significant changes to asset-purchases. This was the confirmation traders needed to sell dollars again.
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