The euro depreciated against the U.S. dollar and fell below 1.07 while the British pound has shrugged off the U.K.’s process of leaving the European Union. One reason for the pound’s resilience is the fact that an expected slowdown of the U.K. economy has not yet materialized. Inflation seems to be accelerating, paving the way for higher interest rates while investors expect the U.K.’s negotiation talks with the EU to be constructive.
The pound tested the 1.25-level but for the time being, it was unable to hold above that level. A break above 1.2530 could encourage sterling bulls to push the pound for a test of 1.2560. Above 1.26 however, we expect sterling to head for a test of 1.27. A current support is seen at 1.2425. Sterling traders will watch the U.K. GDP report scheduled for release at 8:30 UTC.
The euro knew only one direction on Thursday: downwards. The single currency came under pressure following a report that European Central Bank officials said they are cautious about changing their monetary policy any time soon. Given that dovish message and the slowdown in German consumer prices, there was no reason for euro bulls to justify higher price levels. The EUR/USD could even extend its losses provided that Eurozone CPI data, due for release at 9:00 UTC, comes in weaker-than-expected. Euro traders should also keep an eye on the German Employment report scheduled for release at 7:55 UTC. In short-term time frames we expected the currency pair to trade between 1.06 and 1.0715.
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